Here’s why gold and Bitcoin are surging as US stocks falter
U.S. stocks opened lower today as Wall Street weighed the immediate impact of the U.S. government’s official shutdown, and as the dollar slipped, gold and Bitcoin soared.
- US stocks wavered as U.S. government officially shut down on Wednesday
- ADP data shows private payrolls declined by 32,000 in September, with this a key report for investors eyeing Federal Reserve rate cuts
- Gold rallied to a record high and Bitcoin broke above $116,890 as safe havens gained.
Wall Street traded lower as the first official government shutdown in seven years began, with investors showing some jitters, helping push the Dow Jones Industrial Average down. The blue-chip index was down 80 points.
Meanwhile, uncertainty around the economy also meant the benchmark S&P 500 fell 0.5%, and the Nasdaq Composite slipped 0.6%.
US stocks falter
Stocks had closed higher in September, despite notable slips in the last week of the month, with the S&P 500 ending the period up 4.5%. The Dow edged 2.4% higher, while the Nasdaq climbed more than 6% across the month.
However, with the gridlock in Washington bringing another pause in government funding and set to see federal agencies cease operations, investors have shown concern. The S&P 500 slipped on Tuesday.
A lot of this is due to worries about what happens to scheduled releases of key macroeconomic data.
ADP private payrolls fall by 32k
Among government agencies set to freeze operations is the Bureau of Labor Statistics, which was expected to release the U.S. jobs report for September on Friday.
The uncertainty now puts the just-released ADP private payrolls report under greater scrutiny in the market. Notably, the ADP data showed private payrolls fell in September, missing estimates. Per the report, the private sector lost 32,000 jobs, against an expected gain of 50,000.
Dollar slip sees gold and Bitcoin rise
Although stocks continue to trend near record highs, the market is seeing fresh gains for safe haven assets. With risk-off sentiment up, gold and silver prices have soared to record highs, with the precious metal hitting a new peak as spot gold touched $3,895 an ounce. U.S. gold futures for December delivery soared to highs of $3,918.
The flight to safe havens also saw Bitcoin (BTC) surge. The benchmark cryptocurrency broke above $116,000, rising to an intraday peak of over $116,897 across major crypto exchanges.
The push above $116,000 triggered a wave of liquidations, with shorts feeling the pinch as the squeeze wiped out leveraged positions. Analysts say it could amplify Bitcoin’s upside momentum, and bulls may target a return above $120,000.
Why is gold and crypto up as US stocks slip today?
The shutdown, geopolitical uncertainty, and economic uncertainty are the key drivers of this rally. Also significant is the dollar index bidding for its longest negative streak in a month, something that has added to the safe-haven uptick.
The greenback has shown similar weakness in past shutdowns, and this could set it toward further losses. Notably, risk-on assets could rally in such an environment, with Bitcoin outpacing gold.
“Among the interesting moves in markets this morning: Gold is higher again, hitting yet another record as its price approaches $3,900 per ounce,” said Mohamed El-Erian, president Queens’ College, Cambridge, and Allianz advisor. “The DXY dollar index has depreciated to a two-week low, reinforcing the narrative that it remains the one major asset area that has not experienced a meaningful recovery since April. In fact, it is trading weaker than its level immediately following “Liberation Day,” he added.
