Gold Surges as Shutdown Risk Fuels Safe-Haven Flows

The euro extended gains against the US dollar in Monday’s Asian session, with EUR/USD trading near 1.1720. The move marks the pair’s second consecutive daily advance, driven largely by renewed weakness in the greenback as investors raise bets on additional Federal Reserve (Fed) rate cuts.

The US Personal Consumption Expenditures (PCE) Price Index rose 2.7% year-over-year in August, slightly higher than July’s 2.6% reading and in line with forecasts. Core PCE, which strips out food and energy, held steady at 2.9% YoY, also matching consensus estimates.

The Fed lowered rates by 25 basis points at its September meeting, bringing the target range to 4.00%–4.25%. Market pricing now points to an 90% probability of another cut in October and around a 65% chance of a further move in December, according to the CME FedWatch Tool.

Attention today will turn to remarks from several Fed officials, including Governor Christopher Waller, Cleveland Fed President Beth Hammack, St. Louis Fed President Alberto Musalem, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic. Their commentary may help shape expectations for the upcoming policy path.

On the European side, the European Central Bank (ECB) appears to be nearing the end of its easing cycle after opting for a second consecutive pause in September. While the services sector shows signs of resilience, manufacturing activity continues to lag, underscoring a patchy economic outlook across the eurozone.

Gold prices surged past the $3,800-per-ounce mark for the first time on Monday, driven by a softer US dollar and heightened expectations of further Federal Reserve rate cuts this year.

Friday’s US inflation report added momentum to the rally. According to analysts the steady inflation data strengthens the case for the Fed to cut rates at its October and December meetings.

The CME FedWatch Tool shows traders pricing in a 90% chance of an October rate cut and a 65% probability of an additional move in December. Lower interest rates typically support gold, which offers no yield, while also boosting its appeal as a safe-haven asset in times of uncertainty.

Investor caution was evident across Asian equities on Monday, as markets eyed the risk of a potential US government shutdown. Upcoming US economic data, including job openings, private payrolls, ISM manufacturing PMI, and the closely watched non-farm payrolls report, are also expected to provide further direction.

Oil prices retreated in Asian trading on Monday, reversing last week’s gains, as expectations of higher OPEC+ output and the resumption of Kurdish crude exports to Turkey stoked concerns over a growing global supply surplus.

Both benchmarks WTI and Brent had risen nearly 5% last week amid worries over Russian fuel supply disruptions following Ukrainian drone attacks on key energy infrastructure.

A Bloomberg report on Sunday said OPEC+ is expected to approve another production increase at its October 5 meeting. The Saudi-led group is reportedly considering raising output beyond the 137,000 barrels per day already planned for October, as part of efforts to regain global market share. The move would extend a series of supply hikes this year, reversing deep production cuts implemented in 2023 and 2024.

The International Energy Agency has warned that the coalition’s strategy could push the oil market into record surplus by 2026 if supply continues to outpace demand.

Adding further pressure, Iraq resumed crude exports from the Kurdistan region to Turkey over the weekend, ending a suspension that had lasted more than two years. Initial flows through the Kirkuk-Ceyhan pipeline were estimated at 180,000–190,000 barrels per day, with the potential to increase in the coming months. The restart followed an interim deal between Baghdad, the Kurdistan Regional Government, and international oil companies.

US equities rebounded on Friday, with the US 500 ending a three-day slide as Treasury yields fell after inflation data came in largely as expected, offsetting worries over a fresh wave of trade tariffs from President Donald Trump.

The August Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, increased 0.2% month-on-month, keeping the annual pace steady at 2.9%—in line with expectations. The data helped ease concerns that tariff measures could stoke price pressures.

Following the release, Fed Vice Chair for Supervision Michelle Bowman reiterated her call for the central bank to act decisively, signaling support for further rate cuts amid a softer labor market and subdued inflation.

In corporate news Intel shares jumped more than 4% after The Wall Street Journal reported the White House may introduce a policy requiring US tech firms to match domestic semiconductor output with imports or face tariffs—a move seen as supportive for domestic chip producers.

Adding to trade tensions, President Trump announced a broad set of tariffs late Thursday, including a 100% levy on “branded and patented” pharmaceuticals—though drugmakers investing in US manufacturing will be exempt. Additional duties include a 25% tariff on heavy trucks, 50% on kitchen and bathroom fittings, and 30% on upholstered furniture.