Is Gold Finally Breaking Through $4,000? What the Government Shutdown Means for Your Portfolio

Gold investors are witnessing history unfold. The precious metal hit another record high this week, surging past $3,895 per ounce as the US government shutdown sent shockwaves through financial markets. With prices up nearly 50% since January, the question on every investor’s mind is clear: Will gold finally break through the psychological barrier of $4,000?

The answer appears to be yes, and sooner than many expected. Here is why the current government shutdown could be the catalyst that pushes gold into uncharted territory and what this means for your investment strategy.

The Perfect Storm Driving Gold Higher

Gold futures closed at a record $3,897.50 per ounce while spot gold was last trading at $3,866.66, marking the 39th record high this year. This isn’t just another rally. Multiple forces are converging to create what could be gold’s most significant breakout in decades.

The US government shutdown drove the price of gold even higher, approaching the US$3,900 level as it reached US$3,896.30 early in the morning of Wednesday (October 1) before pulling back. While government shutdowns have happened before, this one hits different. Critical U.S. jobs data due to be published on Friday will be delayed, clouding the outlook for the Federal Reserve just weeks ahead of its next meeting.

This data blackout leaves investors flying blind at a critical moment. The Federal Reserve needs economic data to make interest rate decisions, but the shutdown has created an information vacuum. Markets hate uncertainty, and gold loves it.

President Donald Trump has also threatened to use the shutdown to cut “a lot” of federal employees, who are ordinarily furloughed during a shutdown and brought back to work once it ends. This unprecedented approach adds another layer of uncertainty that traditional market analysis hasn’t accounted for.

Why $4,000 Is No Longer a Dream

Major financial institutions are revising their gold forecasts upward, and the numbers are striking. Prices are expected to average $3,675/oz by the fourth quarter of 2025 and climb toward $4,000 by mid-2026, according to J.P. Morgan Research. But these projections were made before the government shutdown, and many analysts believe the timeline has accelerated.

UBS in a note said it expects gold to rise to $4,200 per ounce over the coming months as the opportunity cost of holding gold is falling. The bank’s analysts point to declining real interest rates and broad dollar weakness as fundamental drivers that will persist regardless of how long the shutdown lasts.

Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, has long held the view that gold can cross the $4,000 mark and he now believes the metal can go even higher. His reasoning goes beyond typical market analysis. Gold is fast closing in on the 4000 target… $4,000 will not be the endpoint, just the start of the strongest bull market in precious metals the world has ever seen.

The math supports this bullish outlook. Analysts are projecting that gold could climb to $4,000 per ounce (or higher) by the end of 2025, suggesting there’s still meaningful upside potential from current levels. With gold already up 46% this year, a move to $4,000 represents just another 3% gain from current levels.

What Makes This Shutdown Different

Not all government shutdowns are created equal, and this one carries unique implications for gold investors. Let’s break it down.

First, the timing couldn’t be worse for economic clarity. The Bureau of Labor Statistics won’t be publishing the upcoming jobless claims report or the consumer price index (inflation). This means investors will be in the dark for a while. Without these critical data points, the Federal Reserve faces a dilemma: cut rates without full information or risk falling behind the economic curve.

Investors are pricing in a 97% probability of a 25-basis-point rate reduction in October and a 85% likelihood of another similar cut in December. The shutdown strengthens the case for these cuts, as the Fed may choose to err on the side of caution when economic visibility is limited.

Second, this shutdown occurs against a backdrop of already elevated economic uncertainty. The latest annual inflation rate for the United States was 2.9% in August 2025, up slightly from 2.7% in July. Rising inflation during a government shutdown creates a toxic mix for traditional assets but a goldilocks scenario for the precious metal.

Third, the international context matters. Central bank demand is likely to remain robust in 2025, moderating from its previous records while staying well above the pre-2022 average of 500-600t. Central banks aren’t waiting for the US to resolve its political disputes. They’re buying gold now, adding fundamental support to the rally.

Portfolio Implications You Need to Consider

Understanding what this means for your portfolio requires looking beyond headlines. Here is why.

Gold’s status as a safe haven is well publicized, but the inexorable rise in the gold price over the last few years has been truly astounding. This isn’t just about crisis investing anymore. Gold has transformed from a defensive play to a growth asset, outperforming the S&P 500 this year.

Private investors are diversifying significantly into gold, according to Goldman Sachs. The bank’s analysts explain that gold ETF holdings totaled 109 tonnes, well beyond their prediction of 17 tonnes despite lower U.S. interest rates being seemingly priced in. This surge in demand from retail investors signals a structural shift in how portfolios are being constructed.

The small size of the gold market amplifies these moves. Because the market remains relatively small (gold ETF holdings are equivalent to around 1.5% of privately owned U.S. Treasuries), a relatively small diversification step out of fixed income may drive the next potential large gold price increase.

For investors wondering about allocation, UBS Global Wealth Management views a mid-single-digit portfolio allocation to bullion as optimal. This suggests 5-7% of your portfolio in gold, higher than traditional recommendations of 2-3%.

The Risk-Reward Equation

Before rushing to buy gold at record highs, consider both sides of the trade.

The Bull Case: Central bank and investor demand for gold is set to remain strong, averaging around 710 tonnes a quarter this year. With demand fundamentals solid and supply constrained, prices have structural support. Two major ongoing conflicts, political instability in France, newly announced tariffs, all of this is combining to create a very unstable picture for investors. Each of these factors independently supports higher gold prices.

The Bear Case: Elevated gold prices are likely to continue to curb consumer demand and potentially encourage recycling. Physical demand from jewelry and retail buyers typically drops when prices hit records. Additionally, if the government shutdown resolves quickly and economic data shows resilience, some safe-haven premium could evaporate.

The Reality Check: Historical patterns suggest caution, but this time genuinely looks different. Gold prices have increased 12% from $3,476 on 1 September to their latest all-time high of $3,895 a month later. Momentum of this magnitude tends to continue, especially when supported by fundamental factors.

Your Action Plan

Given the current setup, here’s a strategic approach to positioning your portfolio.

If you own gold already: Hold your position. The trend remains strongly upward, and selling into strength during a government crisis rarely pays off. Consider taking partial profits only if gold exceeds 10% of your portfolio.

If you don’t own gold: Start building a position gradually. Rather than investing a lump sum at record highs, consider dollar-cost averaging over the next three months. This approach lets you benefit from potential pullbacks while ensuring participation if prices continue higher.

For aggressive investors: Gold has historically served as an inflation hedge, precisely because the precious metal tends to maintain its value even as paper currencies lose theirs. With inflation ticking up and the dollar weakening, leveraged gold ETFs or mining stocks offer amplified exposure to the rally.

For conservative investors: Physical gold or established gold ETFs provide the most direct exposure with less volatility than mining stocks. Focus on liquidity and storage costs when choosing your investment vehicle.

The Bottom Line

Gold breaking through $4,000 is no longer a question of if, but when. The government shutdown has accelerated a trend already supported by strong fundamentals, and investors who wait for a pullback may find themselves chasing prices higher.

We are still very early in the game as gold, and gold related investments are barely 2% of an average investment portfolio worldwide. This suggests the rally has room to run, even from current record levels.

The shutdown represents more than a temporary disruption. It symbolizes the broader uncertainty facing investors: political instability, data blackouts, inflation concerns, and questions about central bank independence. In this environment, gold’s role transcends its traditional safe-haven status.

Smart investors recognize that portfolio construction has changed. The old 60/40 stock-bond allocation no longer provides adequate diversification. Gold at $4,000 might sound expensive, but in a world where uncertainty is the only certainty, it might just be getting started.

The government shutdown has provided the catalyst, but the fundamental case for gold extends far beyond Washington’s dysfunction. As you evaluate your portfolio, remember that waiting for the perfect entry point often means missing the move entirely. The question isn’t whether gold will hit $4,000, but whether you’ll be positioned when it does.

---

Disclaimer: This article is for informational purposes only and should not be considered financial advice, investment advice, trading advice, or a recommendation to buy, sell, or hold any investment or security. The information presented is based on sources believed to be reliable, but its accuracy cannot be guaranteed. Past performance is not indicative of future results. Gold and other precious metals are volatile investments that can experience significant price fluctuations. You may lose some or all of your investment. Before making any investment decisions, you should consult with a qualified financial advisor, tax professional, or investment professional who can assess your individual financial situation, investment objectives, risk tolerance, and time horizon. The author and publisher of this article are not registered investment advisors and do not provide personalized investment advice. Any opinions expressed are subject to change without notice. Neither the author nor publisher shall be liable for any losses or damages arising from the use of this information. Always conduct your own research and due diligence before making investment decisions.