US shutdown in focus as sentiment improves

It was another turbulent week across global markets last week as investors grappled with a cocktail of macro and policy developments. Earnings season, growing concerns about overinvestment in artificial intelligence, and shifting expectations around monetary policy all contributed to volatility. Persistent unease about the U.S. political landscape continued to shape sentiment, with the protracted government shutdown, now stretching beyond 40 days, becoming an increasingly central story.

It had initially been dismissed by markets as a minor political inconvenience — a familiar occurrence in U.S. fiscal politics. However, that complacency has faded. Recent data, including the University of Michigan Consumer Sentiment Survey, showed confidence among American households hovering near all-time lows, suggesting that the prolonged closure is beginning to bite. The late-week rally in equities, supported by signs of progress in congressional negotiations, reflected optimism that a deal could soon be reached. News that the Senate has approved a bill to end the shutdown has further buoyed risk sentiment, although the legislation must still pass through the House of Representatives before federal employees can return to work.

Equity markets have welcomed the development, with U.S. futures, European indices, and Asian shares all trading higher. Yet the move in precious metals has added an intriguing twist. Gold has jumped roughly 2%, and silver gained 3%, even as broader sentiment improved. The rally in gold — typically a haven asset — points to lingering caution among investors. While part of the move may reflect technical factors following recent price pullbacks, it could also indicate persistent demand for protection amid ongoing uncertainty over U.S. fiscal policy and global growth.

President Trump’s comments about potential tariff-linked rebates underscore how expansive fiscal ideas are once again shaping the outlook. In this “run-it-hot” environment — with governments spending more even as inflation remains above target — gold’s renewed strength may signal investors hedging against the possibility of hotter inflation and renewed policy uncertainty.

Gold (XAU/USD) daily chart