Gold prices surged to a record high and Wall Street futures dropped on Tuesday, September 30, accompanied by a weakening dollar, as the US government officially shut down after lawmakers failed to pass a funding deal.
The stalemate, which began after the fiscal year ended on Tuesday, has forced the closure of non-essential services.
The prospect of halted US services overshadowed earlier market optimism that the Federal Reserve would cut interest rates again. While US futures fell, most Asian and European markets managed to edge upward.
Democrats and Republicans remain at loggerheads over continued government funding, with both sides trading blame. Senate Republicans were unable to secure the necessary Democratic votes to advance a temporary funding patch passed by the House. Democrats are demanding the restoration of hundreds of billions of dollars in healthcare spending for low-income households, which the Trump administration is poised to eliminate.
The closure will halt non-essential operations, leaving hundreds of thousands of civil servants temporarily unpaid and potentially disrupting payments for many social safety net benefits.
US President Donald Trump threatened to use the stoppage to punish Democrats, targeting progressive priorities and forcing mass job cuts. “So we’d be laying off a lot of people that are going to be very affected,” he said. The President added that those laid off would “be Democrats,” and that he would use the pause to “get rid of a lot of things we didn’t want, and they’d be Democrat things.”
Republican House Speaker Mike Johnson pinned the blame on the opposition, stating on X that “Democrats have officially voted to CLOSE the government.” Meanwhile, Democratic leaders Chuck Schumer and Hakeem Jeffries released a joint statement asserting their party remained “ready to find a bipartisan path forward to reopen the government in a way that lowers costs and addresses the Republican healthcare crisis.”
While most past shutdowns have had minimal lasting market impact, investors are particularly concerned this time as the closure could prevent the release of the key non-farm payrolls report on Friday, a crucial indicator the Fed uses to guide rate decisions.
Despite the immediate market reaction, strategist Michael Brown of Pepperstone advised investors to remain calm: “I remain strongly of the view that (investors) should continue to look through the political noise as, in the grand scheme of things, the expiration of federal funding doesn’t make especially much difference.” He reasoned that a deal will eventually be cut, the government will reopen, and any delayed economic data will be released in due course.
However, the safety concerns related to the shutdown, combined with a weaker dollar and bets on lower borrowing costs, drove safe-haven gold to a new record high of $3,875.53.
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