Gold Hits High On US Shutdown Fears, Bonds Steady: Markets Wrap

Gold touched a new record high and Treasuries held their gains as concerns mounted over a US government shutdown.

The precious metal, a traditional safe-haven asset, climbed above $3,839 an ounce, taking gains this year to 46%. Asian shares were flat at the open. Treasuries were little changed Tuesday after gaining across the curve in the prior session. A gauge of the dollar edged up after President Donald Trump set a 10% tariff on softwood timber and lumber imports into the US.

Vice President JD Vance said he believes the US government is on track to shut down after Trump’s last-ditch meeting with top congressional leaders ahead of the Oct. 1 deadline ended without resolving Democrats’ demands.

Investors remain concerned that a shutdown could hinder some crucial data releases that they require to discern how the US economy is doing. That includes Friday’s nonfarm payrolls report, which would offer details on how the labor market is holding up and help the Federal Reserve decide on the path for rate cuts.

“Given the importance of the job market to the Fed’s rate-cutting decisions, risk that the September unemployment report could be delayed could add to the market’s anxiety over the direction of policy,” said Kathy Jones, chief fixed income strategist at Charles Schwab & Co.

Emerging-market assets climbed to start the week as the looming risk of a shutdown weighed on the dollar. The US Treasury 10-year yield declined to 4.14% — shutdowns are typically associated with gains for bonds because of their potential to restrain the economy.

The primary focus for market participants is currently the path forward for US interest rates, with asset prices being supported by the notion that cuts are coming and they could end up being relatively deep, wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne.

“As the markets await the beginning of the final quarter of the year, the odds remain skewed to another Fed cut in October and December,” he wrote.

To some extent gold’s gains slid under the radar because record highs for the precious metal are so common now as to be completely passe. But Monday’s 2% surge from already elevated levels does speak to a degree of angst about the risk for the shutdown to deliver a fresh bout of turmoil. That also boosts the potential for gold to drop sharply should America avoid a shutdown.—Garfield Reynolds, MLIV Team Leader. For full analysis, click here.

A gauge of US-listed tech shares from China surged 2% ahead of the week-long holiday in the country starting Wednesday. Investors put money into exchange-traded funds that buy Chinese stocks last week, joining a wave of optimism around artificial intelligence that has fueled a $2.7 trillion onshore equity rally this year. 

In Asian developments, China announced it’s offering 500 billion yuan ($70 billion) worth of capital to spur investment, in a long-anticipated move to boost growth after provinces likely diverted funds from projects as they borrowed more to restructure hidden debt.

Meanwhile, Australia’s central bank will meet on Tuesday and is expected to keep interest rates unchanged.

On Monday, investors also heard from a handful of Fed speakers. St. Louis Fed President Alberto Musalem said that while he’s open to further rate cuts, policymakers should move carefully, since inflation is still running above target. 

New York Fed President John Williams, on the other hand, said inflation risks have come down, but those for employment have moved up. He didn’t indicate whether he might support another rate cut when policymakers next gather in late October.

Apart from Friday’s jobs report, there’s also the JOLTs report releasing on Tuesday that will offer a picture on job openings while Wednesday’s data will shed light on company hirings. Strategists said the recent negative revisions and downtrend in jobs numbers will raise the stakes for Friday’s release. 

In geopolitical developments, Trump and Israeli Prime Minister Benjamin Netanyahu said they had agreed to a 20-point plan designed to end the war in Gaza, though the prospects for peace remained unclear without the direct involvement of Hamas.

In commodities, oil pushed lower for a second session as the market weighed a looming glut and the possibility for an end to hostilities in Gaza, which could siphon some of the war premium out of prices.

Corporate News:

• Zijin Gold International Co. will start trading in Hong Kong on Tuesday after the international unit of China’s biggest miner raised $3.2 billion in the world’s largest initial public offering since May.

• Electronic Arts Inc. agreed to sell itself in the largest leveraged buyout on record to a group of investors that includes a firm managed by Trump’s son-in-law Jared Kushner and Saudi Arabia’s sovereign wealth fund.

• Alphabet Inc.’s Google agreed to pay $24.5 million to resolve Trump’s claims that being banished from his YouTube channel after the Jan. 6, 2021, riot at the US Capitol was illegal censorship, according to a court filing.

• Huawei Technologies Co. is preparing to sharply ramp up production of its most advanced artificial intelligence chips over the next year.

Some of the main moves in markets: 

Stocks

• S&P 500 futures were little changed as of 10:05 a.m. Tokyo time

• Hang Seng futures rose 0.1%

• Nikkei 225 futures (OSE) fell 0.6%

• Japan’s Topix fell 0.4%

• Australia’s S&P/ASX 200 rose 0.2%

• Euro Stoxx 50 futures fell 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1720

• The Japanese yen fell 0.1% to 148.76 per dollar

• The offshore yuan was little changed at 7.1278 per dollar

• The Australian dollar rose 0.1% to $0.6584

Cryptocurrencies

• Bitcoin rose 0.1% to $114,484.06

• Ether fell 0.5% to $4,206.56

Bonds

• The yield on 10-year Treasuries was little changed at 4.14%

• Japan’s 10-year yield declined two basis points to 1.635%

• Australia’s 10-year yield declined three basis points to 4.30%

Commodities

• West Texas Intermediate crude fell 0.5% to $63.13 a barrel

• Spot gold rose 0.1% to $3,838.40 an ounce

This story was produced with the assistance of Bloomberg Automation.