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Gold Extends Gains on US Fiscal Concerns, Rate-Cut Expectations

(Bloomberg) -- Gold extended gains, after recording its biggest daily jump since May, in anticipation of further rate cuts following a deal to end the longest government shutdown in US history.

Bullion rose to around $4,140 an ounce, having surged 2.9% in the previous session. A bipartisan agreement to end the shutdown in Washington – supported by President Donald Trump — is expected to pass in the Senate, meaning the government will likely reopen within days.

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A restart would see the release of long-delayed economic data, providing a crucial temperature check for the economy. The figures are expected to show a worsening outlook, which will likely be a catalyst for more central bank easing — a tailwind for gold, which doesn’t pay interest.

Bullion’s haven appeal was also reinforced by the economic risk inherent in US plans to pay a so-called tariff dividend. Trump’s suggestion on Sunday that citizens could be mailed a check for “at least $2,000 a person” marks a throwback to Covid-era stimulus checks, which critics said contributed to the 2021-2022 inflation surge. Higher inflation and currency debasement are positive for gold, seen as a better store of value.

“Markets could be digesting President Trump’s post referring to $2k stimulus checks,” Daniel Ghali, a strategist at TD Securities, said in a note. While observing that US Treasury Security Scott Bessent had downplayed this theme, he added: “Many are clearly eager to pull the trigger in gold markets.”

Despite its pullback from a record high above $4,380 an ounce last month, gold remains on track for its best annual performance since 1979. Its ferocious rally – the metal has gained more than 55% this year – is based on several factors, including elevated central-bank buying and greater inflows to exchange-traded funds.

Geopolitical risk and the so-called debasement trade, whereby investors pull away from sovereign debt and currencies to protect themselves from runaway budget deficits, have also underpinned growth. Many banks remain positive on the outlook for the metal: Goldman Sachs Group Inc., for example, expects it to reach $4,900 by the final quarter of 2026.

“The medium-term drivers that underpin gold’s constructive bias remain intact,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. He added the US Federal Reserve was expected to continue easing policy into 2026, with interest rates likely to trend lower.

One note of caution is the lack of consensus among Fed governors on the next course of action. While Federal Reserve Bank of San Francisco President Mary Daly warned against keeping rates too high for too long, her counterpart for St. Louis, Alberto Musalem, underscored the need to approach additional cuts with caution, as he expects the economy to rebound in the first quarter of 2026.

Gold was up 0.7% at $4,144.08 an ounce as of 11:26 a.m. Singapore time. The Bloomberg Dollar Spot Index was up 0.1%. Silver, platinum and palladium all gained.