Why a US government shutdown is looming — And what’s driving gold prices to record highs

The United States is teetering on the brink of its first government shutdown in almost seven years, owing to a deep partisan standoff in Congress over funding and health care. Unless Senate approval is secured for a House-passed measure extending federal funding for seven weeks, the government will shut down at 12:01 a.m. Wednesday, risking furloughs or layoffs for thousands of federal employees.

Senate Democrats insist they won’t back the bill unless it includes an extension of expiring health care tax credits from the Affordable Care Act. Republicans, including President Donald Trump, argue for a “clean” funding extension devoid of added provisions. With no breakthrough in talks so far, Vice President JD Vance declared that a shutdown now appears inevitable.

Spot gold hits new heights

As shutdown fears deepened, precious metals surged. On Tuesday, spot gold rose 0.9% to USD 3,866.90 per ounce, while December gold futures climbed 1% to USD 3,894.90, nearing a 14-year high. Analysts suggest gold might even challenge the USD 4,000 mark by year-end, buoyed by expectations of rate cuts and intensifying geopolitical risks.

Historically, a government shutdown occurs when Congress fails to pass appropriations — forcing non‑essential federal functions to pause. Since 1980, the US has endured ten shutdowns; the most severe recently lasted 35 days from December 2018 to January 2019, during which approximately 340,000 federal workers were furloughed.

Domestic markets echo global trend

In India, gold futures on the MCX extended gains for a fourth straight session. December gold jumped ₹1,217 (1.04%), reaching a new record of ₹1,17,561 per 10 grams. The February 2026 contract also soared ₹1,314 (1.12%), touching ₹1,18,788 per 10 grams.

Silver followed suit. December silver futures rose ₹1,101 (0.77%) to ₹1,44,200/kg, while the March 2026 contract surged ₹1,127 (0.78%), hitting ₹1,45,858/kg.

Rahul Kalantri, Vice‑President of Commodities at Mehta Equities, said demand for safe havens has surged amid uncertainty over the US shutdown, new tariffs, and expectations of rate cuts.

Global performance & inflows

Globally, gold futures for December registered a spike to USD 3,895.22 per ounce, while silver edged up to USD 47.41 per ounce. According to Jigar Trivedi of Reliance Securities, the precious metals sector is now on course for its strongest monthly gain since 2011, with gold rallying over 11% in September.

Meanwhile, global investors are piling into gold via ETFs. Renisha Chainani, Head of Research at Augmont, noted that these funds attracted around USD 10.5 billion in September — raising total inflows this year to roughly USD 50 billion.

Economic fallout & outlook

Analysts caution the shutdown could shave 0.15 percentage points per week off US GDP growth. While short shutdowns have limited effect — thanks in part to retroactive payments to furloughed workers — prolonged funding gaps threaten public confidence and disrupt federally funded programmes.

Still, markets have shown resilience in past interruptions. Equity indices often rebound after initial dips once shutdowns end. Yet, combined with rate cut speculation, trade tensions and political uncertainty, the current developments have cast a long shadow over global markets — and sent gold gleaming brighter than ever.