Dollar Plunges as Gold Soars Amid Growing Fears of a U.S. Government Shutdown

On the brink of a total shutdown, Washington shakes the global markets. This Monday, September 29, the budget deadlock in the US Congress revives the specter of a shutdown as early as Wednesday, plunging investors and institutions into uncertainty. In an already uncertain climate, marked by central bank hesitations and the fragility of US indicators, this political stalemate raises fears of a major loss of visibility. Investors are repositioning urgently, between a flight to safe havens and anticipation of macroeconomic turbulence.

Markets in motion: gold in the spotlight, the dollar loses ground

As the specter of a federal shutdown becomes clearer in the United States, investors cautiously redirect their market positions.

Gold reached a new all-time high at 3,819 dollars an ounce, supported by a dollar decline and increasing concerns related to the US budget deadlock. In this context, safe haven assets are favored, while currencies and stock markets show more moderate movements.

Here are the main developments observed this Monday, September 29:

• Gold: the ounce of gold crossed a historic record, reflecting strong demand for hedging amid political uncertainty;

• The dollar: the dollar index fell by 0.2%, to 97.952. Against the yen, the greenback dropped by 0.6%, to ¥148.61, erasing part of its gains from the previous week. The euro appreciated slightly, gaining 0.1% to reach $1.1709, but the currency remains in a low range;

• Stock markets: the global MSCI All-World index rose by 0.16%, signaling a cautious reaction from global markets. In Europe, the STOXX 600 gained 0.3%, heading towards a monthly performance of +1.1%, its third consecutive month of increases;

• A positive seasonality: Analysts highlight that the fourth quarter is historically favorable for stocks, with the S&P 500 rising in 74% of cases during this period;

• Bond yields: the 10-year Treasury yields stabilized around 4.16%, after being pushed higher by a series of encouraging economic data the previous week.

These adjustments reflect a climate of vigilance. Thus, investors favor a defensive approach, awaiting crucial political decisions in Washington in the coming hours.

A government at a standstill

The stakes of the shutdown go beyond immediate considerations. If no agreement is reached by Wednesday, many federal agencies would cease to operate, resulting in a halt in the release of on-chain economic data, particularly the September employment report.

In a note published Monday, Bank of America analysts warned: “If the shutdown lasts beyond the Fed meeting, the Fed will rely on private data for its policy decisions”.

At this stage, markets still anticipate a 90% probability of a rate cut in October, and 65% for a second one in December. However, Bank of America tempers this optimism: “on the margin, this could reduce the likelihood of a cut in October, but only marginally.”

The prospect of a prolonged shutdown raises greater social concerns. The same analysts highlight that each week of shutdown would cost about 0.1 percentage point of GDP, a limited impact certainly, but prone to intensify “if the government took the opportunity to proceed with permanent layoffs,” with effects on employment and consumer confidence.

In this context, the next hours will be decisive. Although markets maintain a form of apparent calm, the combination of a possible statistical blackout, a Fed deprived of reliable benchmarks, and a tense political climate could quickly reshuffle the cards. A prolonged deadlock could revive the appeal for alternative assets and uncorrelated values, while the crypto market has just picked up colors again.