ISTANBUL

The price of gold increased by 0.9% on Wednesday, hitting a historic high of $3,895.33 as of 0830GMT, after the US government was shut down as negotiations between President Donald Trump and congressional Democrats to fund the government failed to reach an agreement.

The price of gold hovered between $2,536.91 and $3,819.8 during the last 12 months; it gained 45.9% over the same period.

While a shutdown does not automatically result in a full-blown economic crisis, it creates major disruptions for many aspects of American life.

Many federal employees will be furloughed, or forced to work without pay, while others will be placed on mandatory leave until a new budget is approved. Each federal agency has its own shutdown plan, determining which government employees are essential.

The shutdown also means that some key economic data will not be released in the coming days, as the Bureau of Labor Statistics’ emergency plan stated that economic data will not be published during a government shutdown, which means non-farm payrolls, initial jobless claims, and inflation figures may be delayed.

Meanwhile, aside from the concerns around the US government shutdown, gold prices continued their upward trend, led by geopolitical risk, concerns over the global economy, central banks’ gold demand, and the Fed’s rate cut cycle.

Following US President Donald Trump's insistence, the Fed cut its policy rate by 25 basis points last week.

For the Fed's October and December meetings, markets expect new rate cuts.

Weak inflation figures and increasing unemployment data, as well as Trump, pushed the Fed to lower rates.