The logic of a bull market in gold is further strengthened! Government shutdown weakens growth narrative, US economy could lose $15 billion per week.

A senior official of the US Treasury Department said on Wednesday evening local time that the ongoing two-week federal government shutdown could potentially result in up to $15 billion in economic output losses per week, correcting a recent statement by US Treasury Secretary Scott Bessent who had previously claimed losses of up to $15 billion per day. However, Bessent used this incorrect estimate in two earlier public appearances on Wednesday, while urging Democrats to "actively be heroes" and stand together with Republicans to end the shutdown. For investors fond of gold, the potential huge losses caused by the US government shutdown undoubtedly serve as a major positive catalyst for gold prices, which have surged over 60% this year, outperforming the MSCI global stock market benchmark and hitting historical highs repeatedly. The impact of the shutdown brought about by the phrase "loss of $15 billion per week" has exacerbated concerns about slowing US growth and policy uncertainty, leading to increased bets on interest rate cuts and a preference for safe-haven assets, all of which tend to support the logic of gold prices hitting new highs. The above-mentioned Treasury official, who released the latest data on US economic losses, stated that the latest cost estimate is based on the latest assessment report from the White House Economic Advisory Committee. The federal government shutdown is beginning to "strike the muscles of the US economy" Bessent stated in a press conference that the government shutdown has begun to "cut into" the "strongest muscles" of the US economy. Bessent emphasized that the influx of investments into the US economy (including massive investments in artificial intelligence) is sustainable and just getting started, but the federal government shutdown is increasingly becoming an obstacle to these massive investments. "There is indeed suppressed demand, but President Donald Trump has unleashed this prosperity through his policy path," Bessent said in an interview at the International Monetary Fund and World Bank annual meeting in Washington. The only thing slowing us down here is this federal government shutdown, Bessent said in the interview. He stated that incentives in the new tax law introduced by Republicans and the tariff policy led by President Trump will allow this unprecedented AI investment boom to continue for the long term, driving sustained growth. "I think we may be in a period similar to the late 19th century when railway construction surged, and the boom in Internet and office technology in the 1990s," Bessent said. Bessent also stated that for the fiscal year ending September 30, 2025, the US federal deficit was less than the previous fiscal year of the Biden administration at $1.833 trillion. He did not provide a specific figure, but emphasized that the ratio of the US Treasury Department's budget deficit to GDP in the coming years may decline to just 3% of the neutral range. In addition, annual deficit data has not been released by the US Treasury Department. The latest forecast data released by the Congressional Budget Office last week shows that despite the record $118 billion increase in tariff revenue resulting from Trump's tariff policy, the office expects the US deficit for the fiscal year 2025 to only slightly decrease to $1.817 trillion. "The deficit as a percentage of GDP - this is a key indicator for measuring the US fiscal condition and the sentiment of US debt investors, and the first digit now is 5," Bessent said at an economic forum event on Wednesday. When asked if it is possible to see the ratio of the deficit to GDP starting with a 3 in the near future, Bessent emphasized: "Yes, this is still very possible." He added that if the US economy can "continue to grow more, spend less, and constrain fiscal spending," the ratio will drop significantly. Bullish investors in gold envision gold prices surpassing the $5000 super milestone One of Australia's four major banks, ANZ Bank, has followed the footsteps of Wall Street financial giants in raising its target price for gold. Analysts at ANZ Bank stated in their latest research report that amidst increasing global geopolitical and economic uncertainties and the macro background of the Fed's easing policy, the upward trend in gold prices may continue. A research report from the European financial giant Deutsche Bank indicated that the gold price, which has already surpassed $4000, is unlikely to experience a significant pullback, and may only stagnate for a period of time, adjust slightly, and continue on its path to new highs. According to top Wall Street institutions such as Goldman Sachs and JPMorgan, the upward trend in gold prices, which has repeatedly hit historical highs this year and has already surpassed $4000, is not yet finished, and may even break through the epic $5000 level in the future, moving towards the eagerly anticipated "5K era" on Wall Street. The latest news of the US federal government shutdown causing $15 billion in losses per week has reinforced the narratives of safe-haven and rate cut expectations needed for the rise in gold prices, resonating with themes such as geopolitical tensions and central bank gold purchases, thus adding to the logic of gold continuing to set new highs. Undoubtedly, an extended shutdown will greatly amplify global macroeconomic and growth uncertainties, strengthen expectations for Federal Reserve rate cuts, and, coupled with the escalating US-China trade tensions, directly increase demand for safe-haven gold. With the Fed resuming rate cuts in September and entering a new round of rate cuts/loose monetary policy expectations, the pressure of actual interest rates on the upside is easing, the US dollar is significantly weakening, substantially reducing the opportunity cost of holding gold, combined with market concerns about the potential long-term shutdown of the US government, as well as the current US-China trade tensions, all increase global investors and central banks' willingness to allocate to gold. Wall Street financial giant Goldman Sachs has raised its forecast for the spot gold price in December 2026 from $4300 per ounce to $4900 per ounce. The commodities research team at Goldman Sachs stated that the continuous inflow of gold ETFs from western markets and strong demand from central banks still remains in their pricing framework, effectively raising their starting point for gold price forecasts, especially as emerging market central banks are likely to continue diversifying their reserves towards gold. Another Wall Street bank, Bank of America, has given a more aggressive forecast. Strategists from Bank of America stated that the gold price is likely to hit $6000 in the spring of next year. Data from Bank of America shows that the proportion of gold assets in global institutional and private client asset allocations remains low, at 2.3% and 0.5% respectively, indicating that the market's structural bullish positioning in gold is not crowded. A sensitivity study similar to that of Goldman Sachs shows that if only about 1% of private sector-held US debt flows into gold assets, the spot gold price could approach $5000 per ounce. Overall, the gold market size relative to US debt is "extremely small," so a small shift in funds can have a significant marginal price impact, which is the logic behind the sensitivity analysis by JPMorgan Chase and Goldman Sachs on gold prices potentially reaching $5000.