Government Shutdowns and Gold: Analyzing the Impact on Precious Metal Investments

The intersection of political instability and financial markets often leads investors to seek safe-haven assets. With the U.S. government currently in a shutdown, many are wondering: what impact does this have on gold, and should it influence investment decisions? As of October 14, 2025, the U.S. government is experiencing a shutdown due to Congress’s failure to pass funding legislation for 2026. This has led to the furlough of 750,000 workers and suspended pay for approximately 2 million.

Gold as a Safe Haven: A Historical Perspective

Gold has long been considered a safe-haven asset during times of economic and political uncertainty. This is because it is a physical commodity that can be owned and stored, and it tends to maintain its value during periods of inflation and currency devaluation. As Northeastern University economist Bob Triest notes, “Gold is a classic safe-haven asset… the runup of the price of gold reflects the increase in economic uncertainty.”

How Government Shutdowns Influence Gold Prices

In theory, a government shutdown should support gold prices. Shutdowns increase market uncertainty, leading to higher demand for safe-haven assets. Moreover, as government spending is a component of GDP, shutdowns can negatively affect economic growth. The 2013 shutdown, for example, is estimated to have reduced GDP by 0.4% in the fourth quarter of 2013. S&P Global Ratings estimated the shutdown cost $1.2 billion per week.

However, historical data presents a mixed picture. An analysis of the last three government shutdowns in the U.S. reveals that they did not consistently boost gold prices.

October 2013: Gold prices rose initially but then declined before rising again toward the end of the shutdown.
January 2018: Gold prices declined between January 20th and 23rd, only increasing when the shutdown ended.
December 2018 – January 2019: During the longest government shutdown in U.S. history (35 days), gold prices increased, but only by a modest $20.

Metals Focus analysts observed that gold has generally weakened into and out of short government shutdowns. However, longer shutdowns have seen rallies averaging 2%, with that strength holding for a couple of months.

Current Market Dynamics

As of October 7, 2025, the price of gold has risen above $4,000 per ounce for the first time, driven by the U.S. government shutdown and broader global political and economic uncertainty. Gold futures in New York jumped above the $4,000 mark on Tuesday morning, reaching a record high. The spot price of gold reached $4,031.54 on Wednesday morning in London.

Several factors are contributing to this surge:

Geopolitical Tensions: Ongoing conflicts, such as those in Ukraine and Gaza, are driving demand for safe-haven assets.
Trade Wars: President Trump’s tariffs have created economic uncertainty, pushing investors toward gold.
Federal Reserve Policy: Expectations of future interest rate cuts by the Federal Reserve are making gold more attractive.
Central Bank Demand: Central banks worldwide are increasing their gold reserves, reducing dependence on the U.S. dollar.

Potential Impacts of a Prolonged Shutdown

While the historical impact of government shutdowns on GDP growth has been minimal and short-lived, a prolonged shutdown could have more significant consequences. JPMorgan economist Michael Feroli estimates that each week of a shutdown shaves 0.1 percentage point off annualized GDP growth.

A protracted shutdown could also delay the release of key economic data, such as the U.S. jobs report and the Consumer Price Index (CPI), impacting the Federal Reserve’s decisions on interest rates.

Investing in Gold: Strategies and Considerations

If you’re considering investing in gold, here are some strategies and factors to keep in mind:

Diversification: Gold can be a valuable diversifier in a multi-asset portfolio, smoothing risk and return and reducing overall losses when other assets fall.
Safe Haven: Gold tends to perform well during recessions and times of uncertainty.
Inflation Hedge: Gold has an inherently limited supply, making it an inflation hedge.
Investment Options: Gold can be traded as physical gold (bullion bars or coins), stocks, futures, contracts for differences (CFDs), and exchange-traded funds (ETFs).
Storage and Insurance: If you choose to invest in physical gold, consider the costs of storage and insurance.
Market Volatility: Precious metals can be highly volatile, and prices rise as demand goes up. Be cautious of potential scams and counterfeits.

Complementary Investments

Other precious metals, such as silver, can also serve as safe-haven assets during government shutdowns and economic uncertainty. Silver futures are up more than 59% year to date, trading at nearly $48 per ounce as of midday Wednesday.

Conclusion

While government shutdowns can create short-term market jitters and increase demand for safe-haven assets like gold, the historical impact on gold prices has been mixed. The current surge in gold prices is driven by a combination of factors, including geopolitical tensions, trade wars, Federal Reserve policy, and central bank demand.

Investors should carefully consider their risk tolerance, investment goals, and the potential impact of a prolonged shutdown before making any decisions about investing in gold. Diversification remains a key strategy for managing risk in uncertain times.