With gains of 15% in September, 30% in the July–September quarter, and 60% in the first nine months of 2025, silver has been the best-performing asset class. While Gold has seen a parabolic rally, risen 10% in September and has risen over 50% ytd in 2025.
The US Government Shutdown has added fuel to the fire on rising precious metals prices in 2025. Let’s understand in detail the US Government shutdown and its potential impact on Gold and Silver.
Why the Shutdown?
- The U.S. fiscal year begins on October 1, and Congress failed to pass the 12 appropriation bills or a continuing resolution (CR) to fund government operations.
- Partisan disputes surged over funding levels, foreign aid rescissions, and healthcare subsidies (Affordable Care Act). Democrats rejected the GOP “clean CR” proposals, demanding concessions.
- Without legal appropriations, many federal agencies must halt operations, and non-essential employees will be furloughed.
What happens during a shutdown
- During a federal government shutdown, numerous federal agencies and services shut down, including national parks, museums, research projects and certain IRS taxpayer services, according to Congress. Essential services like military, law enforcement, the postal service and air traffic control remain open.
- During this time, essential service workers will work without pay but will receive back pay after the shutdown ends.
Impact on the US Economy
- The shutdown immediately suspends many government services, slows regulatory functions, and suspends data collection (jobs, inflation).
- Over time, economic growth could suffer. Each week of shutdown may shave off some GDP growth (e.g. via reduced federal spending, delays in contracts).
- Public confidence may weaken, especially if the shutdown drags on. Business investment could be delayed amid uncertainty.
Impact on Dollar Index, Gold & Silver
- Dollar Index: The dollar may weaken as political risk increases, and expectations of Fed easing get amplified. A weaker dollar typically supports gold. Indeed, reports say the dollar fell and gold surged amid shutdown fears.
- Gold & Silver: Safe-haven demand will rise. Already, gold hit new highs above $3900/oz, and silver reached a 14-year peak above $47.
- Historically, shutdowns have had mixed effects on gold—some initial boost, then consolidation.
- In this instance, the combination of weak labour data, fears of Fed rate cuts, and political risk is giving gold and silver strong upward momentum.
50-year History of US Govt shutdown
- The last federal shutdown ran for 35 days, from Dec. 22, 2018, to Jan. 25, 2019, making it the longest closure in U.S. history. At the time, the Senate had failed to pass a funding bill that included $5.7 billion requested by President Donald Trump to help construct the U.S. southern border wall.
- The closure in 2018 and 2019 was a partial shutdown, where Congress approved funding for certain agencies, allowing them to stay open as other federal departments closed.
- A full government shutdown occurred in 2013 under President Barack Obama when almost half of non-postal federal employees were furloughed, according to the Committee for a Responsible Federal Budget.
Historical performance of Dollar Index, Gold and Silver
- The dollar often softens in the short term. The DXY tends to dip modestly in the immediate days of a shutdown as political risk and funding uncertainty increase—though moves are typically limited unless the shutdown threatens economic data flow or credit credibility.
- Gold usually rallies, silver rallies more. Gold commonly gains during shutdowns (safe-haven buying + poorer economic outlook), with silver often showing larger percentage moves because it combines safe-haven and industrial demand. The magnitude depends on duration and concurrent macro news (Fed, CPI, labour data).
- Duration matters. Short shutdowns (a few days) produce only modest moves (1–3% in gold). Prolonged shutdowns (weeks) can push larger gains in gold (often 3–8%) and silver (bigger percentage swings), especially if they coincide with dovish Fed signals or weak economic data.
- Market context is decisive. Shutdown impact is amplified when it coincides with weak macro prints or Fed dovishness; if the Fed is hawkish or the dollar is strengthening for other reasons, the shutdown’s effect may be muted or reversed.
The 2019 shutdown cost to the economy
- The last shutdown in 2019 cost the United States an estimated $3 billion in lost GDP, as 300,000 federal workers were furloughed and unpaid.
- The shutdown delayed approximately $18 billion in federal discretionary spending for compensation and purchases of goods and services, and suspended some federal services.
- Furthermore, approximately $6 billion was withheld from employees who worked during the shutdown, but received back pay when the government reopened, according to the report.
Scenario Analysis on Gold and Silver Performance
- Best-Case Scenario (Prolonged Shutdown + Aggressive Fed Cuts)
Triggers: Shutdown drags beyond 4–6 weeks, weakening U.S. growth; Fed cuts rates sharply to stabilise economy; USD weakens further.
Gold: Surges past $4,000/oz (~₹1,22,000/10g) as safe-haven demand dominates.
Silver: Breaks $50/oz (~₹1,55,000/kg), fuelled by both haven demand and industrial/investment buying.
Investor Sentiment: Strong inflows into ETFs and central bank buying accelerate.
- Base-Case Scenario (Temporary Shutdown + Gradual Fed Easing)
Triggers: Shutdown resolved within 1-2 weeks; Fed signals 50–75 bps cuts over FY25; dollar stabilises.
Gold: Consolidates between $3,700–3,900/oz (~₹1,12,000–1,17,000/10g).
Silver: Trades in the $42–46/oz range (~₹1,35,000–1,48,000/kg).
Investor Sentiment: Jewellery demand is muted at high prices, but investment demand remains robust.
- Worst-Case Scenario (Quick Shutdown Resolution + Sticky Inflation)
Triggers: Shutdown resolved in days; inflation proves sticky; Fed delays cuts or hints at one more hike; dollar strengthens.
Gold: Retreats toward $3,500–3,600/oz (~₹1,07,000–1,10,000/10g).
Silver: Pulls back to $40-41/oz (~₹1,28,000–1,32,000/kg).
Investor Sentiment: ETF outflows, profit booking, and retail jewellery demand partially revive on correction.
Disclaimer: This report contains the opinion of the author, which is not to be construed as investment advice. The author, Directors, and other employees of Augmont Goldtech Pvt. Ltd; Augmont Enterprise Private Ltd. and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above-mentioned opinions are based on information which is believed to be accurate, and no assurance can be given of the accuracy of the information. The author, directors’ other employees and any affiliates of Augmont Goldtech Pvt. Ltd; Augmont Enterprise Private Ltd cannot be held responsible for any losses in trading. In no event should the content of this research report be construed as an express or implied promise, guarantee or implication by or from Augmont Goldtech Pvt. Ltd; Augmont Enterprise Private Ltd. that the reader or client will profit, or the losses can or will be limited in any manner whatsoever. Past results are no indications of future performance. The information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. The information contained in this report is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management or investment advisory services. The reports are only for information purposes and are not to be construed as investment advice.
