(MENAFN) Gold prices soared more than 1.4% on Wednesday, reaching an unprecedented high of $4,040.32 by 0835GMT, driven by escalating uncertainty linked to the ongoing US federal government shutdown and investor anticipation of further Federal Reserve rate cuts.

Over the past year, gold prices fluctuated between $2,536.91 and $4,040.32, marking a substantial 54% gain during that period.

The US federal government shutdown entered its seventh day with no resolution in sight after Senate Democrats blocked a Republican-led proposal to extend funding through Nov. 21. While a shutdown doesn’t necessarily trigger an economic crisis, it severely disrupts multiple aspects of American daily life and adds significant uncertainty to the world’s largest economy.

Many federal workers face furloughs or unpaid labor, with some placed on mandatory leave until a budget deal is reached. Shutdown protocols vary by agency, determining which employees are deemed essential.

Key economic data releases will also be delayed as the Bureau of Labor Statistics’ emergency plan suspends reporting during the shutdown. This includes crucial indicators such as non-farm payrolls, initial jobless claims, and inflation figures.

Meanwhile, gold’s rally continues, fueled not only by the US government impasse but also by growing geopolitical tensions, global economic concerns, central banks’ increasing gold purchases, and expectations for the Fed’s rate-cut cycle to persist.

Last week, under pressure from US President Donald Trump, the Fed cut its policy rate by 25 basis points. Markets now anticipate additional rate reductions at the Fed’s October and December meetings. Weak inflation data and rising unemployment, combined with political pressure from Trump, could further prompt the Fed to ease monetary policy.

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