The US government shutdown has added another layer of uncertainty to data and markets. Past shutdowns have often coincided with demand for safe-haven assets, including gold, and a generally weaker US dollar, though outcomes can vary depending on the duration of the shutdown. The last shutdown, which spanned 2018 and 2019 (during President Trump's presidency 1.0), was one of the longest in modern history (over 30 days). During this period, gold rose nearly 4%. USD/JPY and USD/SGD fell 1.5%, and the US dollar index fell over 1%. Oil prices fell over 7.0% on a weekly basis following news of a potential OPEC+ supply increase. Brent crude oil closed at $64.27 per barrel, while WTI crude oil closed at $60.52. For the week, Brent crude fell 6.5%, its biggest weekly drop in over three months, while WTI crude fell 7.9%.

Meanwhile, IMF Spokesperson Julie Kozak, at a press conference on October 2, 2025, expressed both concern and cautious optimism about the current economic environment. Her remarks covered global inflation differentials, economic resilience and potential concerns, the impact of US tariffs, the Federal Reserve's monetary policy adjustments, and the potential impact of the US government shutdown.

Japan's ruling Liberal Democratic Party held a presidential election last Saturday (the 4th), with the winner expected to become the new prime minister. Japan's economy has stagnated for years, but it needs to increase investment in the US. Furthermore, the influx of foreigners has led to widespread unrest. The new prime minister is expected to face multiple tasks, including continuing trade negotiations with the US, implementing measures to regulate foreigners, and, most importantly, stimulating the domestic economy.

Recap of Last Week's Market Performance:

Last week, US stocks retreated from their historical highs, but maintained strong gains overall for the week despite the ongoing US government shutdown. The Dow Jones Industrial Average closed up 238.56 points, or 0.51%, at 46,758.28; the S&P 500 closed flat at 6,715.79; and the Nasdaq Composite fell 63.54 points, or 0.28%, to 22,780.51. The Russell 2000 also rose 0.8%. All four major indexes hit record highs during the session. All three major indices remain on track for weekly gains. The S&P 500 is up more than 1% so far this week, while the Dow Jones and Nasdaq are also up more than 1%. The Russell 2000, a small-cap index, has surged nearly 2% over the same period.

Gold prices rose on Friday, hovering near an all-time high and marking their seventh consecutive weekly gain, amid growing concerns about the economic impact of a prolonged US government shutdown and expectations of interest rate cuts. Spot gold rose 0.7% to $3,887 per ounce, having hit an all-time high of $3,896.70 on Thursday. Gold prices rose over 3%. December U.S. gold futures closed up over 1% at $3,908.9 per ounce, bringing the year-to-date price to over 47%.

Silver prices rose last week, trading at $47.990 per ounce, up 4.6%. The U.S. government shutdown, which halted funding to the U.S. government due to the Senate's failure to secure a majority vote, has increased the appeal of safe-haven assets, such as the precious metal. Spot silver hit another 14-year high of $48.370 mid-week.

The U.S. dollar retreated last week as uncertainty surrounding the U.S. government shutdown clouded the economic outlook and delayed the release of key data crucial to determining the economy's trajectory, such as the non-farm payroll report. The September non-farm payroll report was originally scheduled for Friday but was not released due to the government shutdown.

The euro's rise pushed the dollar index, which measures the greenback against a basket of major currencies, down to 97.72. The index posted its worst weekly performance since July. The index remains range-bound. Directional momentum is currently lacking, and the ongoing government shutdown will only exacerbate the low-volatility environment. For example, if we see more government layoffs, as the administration has threatened, this could lead to further labor market weakness, which could be negative for the dollar.

The euro strengthened modestly against the dollar to around 1.1740, gaining 0.34% for the week. A slight rebound in risk appetite weighed on the safe-haven dollar, and the euro's reaction to the slightly downward revision to Eurozone services data was limited, maintaining a generally weak bullish pattern of choppy upward movement. This week marked its best weekly gain in a month. The dollar rose against the yen, up 0.1% to 147.44 yen, after earlier falling 0.4%. The dollar is still on track for a 1.4% weekly gain against the yen, its largest gain since mid-May.

The dollar also fell against the pound, which rose 0.3% to $1.3479. The British pound recorded its biggest weekly gain since August 11th. A Bank of England survey released Thursday showed that British businesses' hiring intentions remained at their weakest level since 2020, with consumer prices expected to rise at their fastest pace since early 2024, highlighting the challenges facing the central bank. The Australian dollar fell 0.73% to around $0.6545 last week. AUD/USD traded largely within a narrow range of $0.6546 to $0.6629 last week, recovering some of the previous week's losses and heading for its first weekly gain in two weeks, up 0.87%.

Oil prices closed higher on Friday, but fell over 7.0% for the week following news that OPEC+ may increase supply. Brent crude oil closed at $64.27 per barrel, while U.S. West Texas Intermediate (WTI) crude oil closed at $60.52. For the week, Brent crude fell 6.5%, its biggest weekly drop in more than three months, while U.S. crude oil fell 7.9%.

Bitcoin prices rose 1%, with bulls pushing past $120,000 for the first time since mid-August, further fueling market expectations for a new all-time high. As Bitcoin neared $120,000, bearish pressure gradually receded, and the market generally believed the next target would be a new all-time high.

After failing to see a significant pullback overnight, Bitcoin continued to hold support, marking a significant breakout in six weeks. A pullback would constitute a reaffirmation of the breakout, helping to re-establish the $117,300-$120,000 range.

The 10-year U.S. Treasury yield remained at 4.1% on Friday, down 7 basis points, weighed down by growth concerns and signs of labor market weakness. U.S. policymakers are deadlocked over extending the ongoing government shutdown, wiping out public economic activity and risking layoffs. Although the bond market has yet to fully price in the potential fiscal impact of federal employee furloughs, the benchmark 10-year yield held above 4%, suggesting a solid demand outlook.

This Week's Market Outlook:

This week (October 6-10) marks the official start of a "super week" for global markets, with a flurry of market-moving events and key economic data releases. From adjustments in oil market supply and demand policies to the monetary policy trends of central banks around the world, to key indicators reflecting economic vitality, each development has the potential to shake up the global market landscape. Investors should plan ahead and be prepared for market volatility.

Two key events over the weekend will warm up the market for next week. Japan's ruling Liberal Democratic Party holds an internal leadership election. The results may influence Japan's subsequent economic policy direction, in turn having a knock-on effect on the yen exchange rate and Japanese stock market.

In addition, the energy market will face a double test. Saudi Aramco will announce its official crude oil selling price around the same time, and its pricing adjustment will directly affect international crude oil prices. Simultaneously, the eight oil-producing countries of OPEC+ will hold a meeting in Austria to discuss oil production policy. If an agreement is reached on production cuts or increases, it will profoundly alter the global supply and demand landscape for crude oil, impacting energy commodities and related currencies.

Meanwhile, the Nobel Peace Prize nominees have been announced, with the possibility of President Trump being named. Chicago Fed President Goolsbee's speech is also expected. These developments could impact market risk appetite to some extent.

Will the US government shutdown affect the US dollar?

The most significant market impact of the shutdown could be further pressure on the US dollar or interference with the Federal Reserve's October interest rate decision. Generally speaking, US government shutdowns tend to trigger moderate speculation around interest rates and exchange rates among global investors. The current US fiscal saga is no exception.

For a shutdown to have a significant impact on global markets, it would have to last throughout October and approach the record-breaking shutdown of 2018-2019. If this were to happen, it would likely affect the Federal Reserve's month-end policy decision, potentially impacting global capital flows, interest rates, and foreign exchange rates.

Significant federal government layoffs could lead to a further depreciation of the US dollar, prompting capital inflows into the euro and yen markets.

While acknowledging that a shutdown is not a positive for global investors, they do not consider it a significant risk event.

Historically, the impact of shutdowns on the market has been relatively mild. Past government shutdowns have typically resulted in only modest and short-lived volatility in the stock and bond markets, as investors understand that the economic impact is generally mild and short-lived. U.S. Treasury auctions and repayments will proceed normally, and while IPO activity and some regulatory processes may be suspended, neither poses a significant risk of market disruption.

The U.S. dollar has continued its downward trend, declining for the fourth consecutive trading day as the political deadlock in the U.S. government continues to intensify. The failure of U.S. lawmakers to pass a federal funding bill, triggering the government shutdown, has weakened market confidence in the dollar.

Investor concerns about a prolonged political deadlock have boosted demand for safe-haven currencies such as the Japanese yen, Swiss franc, and euro. Foreign exchange strategists warn that continued uncertainty could put renewed downward pressure on the dollar.

While past government shutdowns have had limited economic impact, the current market's persistent pessimism about the dollar, coupled with rising geopolitical and fiscal risks, could exacerbate the dollar sell-off.

Government Shutdown and Weak Dollar: Gold Price Closes on $4,000

Spot gold hit a record high of $3,895.20 last week, demonstrating its strength. A weakening dollar, risk aversion fueled by the US government shutdown, and weak jobs data reinforcing expectations of a Federal Reserve rate cut all combined to support gold's upward trajectory. Year-to-date, gold prices have risen 45%.

The government shutdown was a key driver of gold's gains last week. Due to partisan disagreements, the White House and Congress failed to reach a funding agreement, leading to a large government shutdown effective midnight on Tuesday, putting thousands of federal jobs at risk. S&P Global Ratings emphasized that this uncertainty directly impacts the Federal Reserve's monetary policy outlook and could even amplify the risk of a recession.

While government shutdowns have historically had varying correlations with market performance, this time the context is different. Trump's push for a federal government restructuring, including cutting approximately 300,000 jobs by December, exacerbates the economic consequences of the shutdown.

Amidst this policy uncertainty, investors naturally turn to gold as a safe haven, especially in a low interest rate environment, where its appeal is further enhanced.

As the global reserve currency, the performance of the US dollar directly impacts the attractiveness of dollar-denominated gold. Last week, the US dollar index fell to a near one-week low of 97.44. This weakening trend makes gold more competitive for overseas buyers, as a depreciating dollar means foreign investors can exchange less of their own currency for more gold.

The dollar's pressure often stems from amplified negative market sentiment toward the US, particularly during the government shutdown, which further exacerbates the dollar's role as a victim. Historically, gold has outperformed during periods of dollar weakness. This recent decline in the dollar is not just a short-term fluctuation, but also a sign of an economic slowdown. It provides a solid foundation for gold, allowing it to stand out among non-interest-bearing assets.

Looking ahead, investor interest is increasing, with both institutional and retail investors experiencing a fear of missing out. If this trend continues, it wouldn't be surprising for gold prices to break through $4,000 per ounce.

In summary, the record high gold prices are the result of a combination of factors, including a weakening dollar, the government shutdown, and weak employment. This has not only boosted safe-haven demand but also reinforced expectations of interest rate cuts. Amidst an uncertain global economic outlook, gold is experiencing a strong bull market, and investors who seize the opportunity could reap rich returns. However, be wary of the risk of profit-taking among bulls; rational investment is the key to long-term success.

The farce is over! OPEC+ strongly denies the rumors; could oil prices rebound?

The Organization of the Petroleum Exporting Countries (OPEC+) Secretariat issued a statement last Tuesday, denying reports that OPEC and its allies planned to increase crude oil production by 500,000 barrels per day in November at their meeting last Sunday. The Secretariat called the report "completely false and misleading, and the relevant ministerial officials have not yet discussed the upcoming meeting." This statement has alleviated market concerns about oversupply.

The conflict between supply and demand has prompted recent market caution. On the one hand, ongoing Ukrainian drone attacks on Russian refineries pose supply risks; on the other, weakening demand and expectations of increased production have raised concerns about oversupply.

Geopolitical supply risks have not completely disappeared. In response to Ukrainian attacks on its infrastructure, Russia has extended its gasoline export ban until the end of the year and tightened restrictions on diesel shipments. Meanwhile, while the recent resumption of crude oil exports from Kurdish regions in Turkey triggered an initial sell-off, this factor is no longer the dominant factor influencing the supply landscape.

While these developments have a limited impact amidst overall demand concerns, they are still sufficient to prevent bullish investors from fully abandoning their positions—at least for now.

On the other hand, demand concerns are escalating, driven primarily by weak economic data and the knock-on effects of the ongoing US government shutdown. The US Bureau of Labor Statistics has suspended its employment and inflation reports, leaving the Federal Reserve facing a data vacuum ahead of its October 29th policy meeting. Without access to non-farm payroll and consumer price index (CPI) data, the Fed is likely to hold interest rates steady, complicating monetary policy forecasts and increasing the risk of a flattening yield curve.

A more pressing issue for crude oil demand is the furlough of nearly 750,000 federal government employees, some of whom may be permanently laid off through the "Reduction and Increasing" (RIF) process. This will directly impact consumer spending, particularly in energy-sensitive sectors such as travel, appliances, and automobiles—key sectors for refined product demand.

Overall, US crude oil prices have remained range-bound and are likely to continue trading sideways until new catalysts emerge. However, with rumors of OPEC+ production increases, the threat of a prolonged shutdown in US consumption, and resistance from both moving averages, the risk balance in the crude oil market remains tilted to the downside.

This week's conclusion:

Partisan wrestling in the US has led to a government shutdown, exposing a black hole in economic data.

The US federal government has once again been plunged into a shutdown crisis, a political storm that has morphed into a "perfect storm" engulfing the economy. As political maneuvering in Washington intensifies, the Federal Reserve's interest rate decision-making table is filled with incomplete economic data. This shutdown has not only put 750,000 federal employees at risk of unemployment but has also sent ripples through financial markets. Economists warn that this political farce is pushing the US economy into uncharted waters.

The political drama of the US government shutdown is reverberating across the economy. From the Federal Reserve's data fog to the power struggles between the two parties, from the cautious assessments of rating agencies to market jitters, this crisis is comprehensively testing the resilience of the US economy. While history suggests that a short-term shutdown will have limited impact, the ultimate cost of this political storm, amidst a high interest rate environment and slowing global economic growth, may be far greater than expected. As Washington's political players maneuver their power, the fate of the US economy hangs in the balance.

Overview of Important Overseas Economic Events and Events This Week:

Monday (October 6): Eurozone Sentix Investor Confidence Index for October; Eurozone Retail Sales Month-over-Month Rate for August (%)

Tuesday (October 7): Australia ANZ Consumer Confidence Index for the week ending October 5; US Trade Balance for August (US$ billion); US New York Fed One-Year Inflation Expectations for September (%); Bank of England Governor Bailey's speech

Wednesday (October 8): US EIA Crude Oil Inventory Change for the week ending October 3 (10,000 barrels); US IPSOS Consumer Sentiment Index (PCSI) for October; ECB President Christine Lagarde's speech; Reserve Bank of New Zealand's interest rate decision; Reserve Bank of New Zealand Governor Orr's monetary policy press conference

Thursday (October 9): US Initial Jobless Claims for the week ending October 4 (10,000); Federal Reserve Monetary Policy Meeting Minutes; Federal Reserve Chairman Powell delivered opening remarks at a community bank conference hosted by the Federal Reserve Board.

Friday (October 10): Canada's September employment change (10,000); Canada's September unemployment rate (%); U.S. University of Michigan Consumer Confidence Index preliminary reading for October.

Disclaimer: The information contained herein (1) is proprietary to BCR and/or its content providers; (2) may not be copied or distributed; (3) is not warranted to be accurate, complete or timely; and, (4) does not constitute advice or a recommendation by BCR or its content providers in respect of the investment in financial instruments. Neither BCR or its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.