Gold at Record Highs Ahead of FOMC Minutes Amid Shutdown

As the US government remains shut down, markets are turning their attention to the Fed's minutes to see if there is any reason to doubt the expected rate cut at the end of the month.

The Latest Developments

• The US government shutdown continues with little sign that either side is willing to break the stalemate, as polling shows voters are displeased with how both sides are handling the situation.
• The minutes for the Fed's last meeting will be closely followed to see if the shutdown has any impact on the outlook for monetary policy, given that the government won't be publishing key data such as NFP and inflation.
• The odds of a rate cut at the end of October have declined slightly, but the economic impact of a prolonged shutdown is seen as supporting further Fed easing.

No End In Sight For Shutdown

US senators returned to vote on Monday as non-essential services of , pending approval of new spending from Congress. The sticking point lies in the Senate, following the Republican-controlled House's narrow passage of a "clean" spending bill that would fund the government until the end of November. However, to pass, it requires 60 votes in the Senate, and so far, only three Democrats have defected, resulting in a total of 54 votes. Democrats are holding out in the hopes of forcing a rollback of spending cuts approved earlier this year through reconciliation in the "Big Beautiful Bill", particularly subsidies for Medicaid. Both sides appear to be confident in their dominance, and neither is showing any signs of giving up. Opinion polling indicates that  about equally, with 52% disapproving of Republicans and 49% of Democrats.

As the shutdown drags on, it could pose a complication for the markets, as government-issued key data, including inflation and jobs data, remains in a blackout. The Fed is widely expected to cut rates when it meets at the end of October and would otherwise rely on that data to inform its decisions.  slightly, from almost 100% last Wednesday to the current 94%. The shutdown casts a new light on the upcoming release of the FOMC minutes, as traders attempt to determine the Fed's potential response in this new context.

No Data, But Cut Still Coming

The minutes of the last meeting will come under increased scrutiny after Fed Chair Powell indicated that monetary policy was being balanced between concerns about a sagging labour market and persistent inflation. Analysts have argued that a prolonged shutdown would , as slower government activity and spending would weigh on the economy. Traders will closely examine the minutes, as the Fed remains divided on the outlook for tariff-induced inflation and the impact of a slower economy on the job market. If the minutes emphasise concerns about inflation, then markets may back away from hopes for a rate cut. If the main concern is the jobs market, then investors could become more confident that the Fed will ease through the rest of the year. Meanwhile, gold prices continue to score record highs as investors prefer safe havens amid the uncertainty.

Gold Risks Pulling Back After All-Time High

Gold broke outside a running triangle to hit a new all-time high near $3980 per ounce. The measured move projection points to $4000, which would be followed by $4050 and $4100 during price discovery. However, the RSI is turning from overbought after a double-top formation, indicating that a short-term pullback may be due. Support sits at the newly formed level around $3895, provided that $3930 fails to hold against bearish pressure. If bearish momentum increases, local lows near $3850 or even $3790 may be tested.

Source: SpreadEx | Gold, 1-hour