MW U.S. stocks and gold are rallying on hopes that the shutdown ends. What happens once the government reopens?
By Myra P. Saefong
The S&P 500 and gold are both rallying, with stocks nearing a return to record territory. Why the assets could diverge when the shutdown finally ends.
U.S. stocks and gold have moved higher in tandem so far this week.
U.S. stocks and gold prices have charged higher together this week, with equities back near record territory. Yet while a potential end to the U.S. government shutdown has been supportive for both the risk-on and risk-off assets, they could face different outcomes once the government reopens.
An end to the shutdown will bring about a "bit of clarity" for the Federal Reserve, as U.S. economic data that have been delayed will be released and offer guidance for financial markets, said Fawad Razaqzada, market analyst at StoneX.
That "removes a source of uncertainty," which should be good news for stock markets, he told MarketWatch by email.
An end was in sight for the record-breaking federal government shutdown, following a Senate vote in favor of a compromise package. The House of Representatives is expected to vote on the package as soon as Wednesday, potentially reopening the government this week.
U.S. stocks, as a risk-on asset, and gold, which is seen as a risk-off and safe-haven asset, typically have an inverse relationship. That makes their rise in unison a bit unusual.
Read: Dow's banner day points to investor pivot beyond S&P 500's top winners
However, during past government shtudowns, the S&P 500 and gold have been relatively resilient, on average, dating as far back as September 1976, according to an analysis of data by Dow Jones Market Data.
Gold and stocks, on average, tend to hold their ground during government shutdowns and then rise in the month after they end.
On average, the benchmark stock index has gained 50% of the time during shutdowns, while gold prices have climbed 45% of the time - and both saw increases 60% of the time in the month after the end of a shutdown.
The S&P 500 SPX on Tuesday edged up 0.2%, after climbing 1.5% on Monday. That left it only 0.6% off its record close in late October. Gold for December delivery (GCZ25) (GC00) ended a bit lower Tuesday after settling at $4,122 an ounce Monday, the highest level since Oct 24. Gold was 5.6% off its record close from Oct. 20.
Why gold at $4,000 matters
U.S. stocks and gold have been "riding the same tailwind" - primarily, expectations of lower yields, said Adam Koos, president and senior financial adviser at Libertas Wealth Management Group. But if economic data confirm a real economic slowdown, he noted, gold will probably keep seeing prices rise, while stocks could give some profits back.
Should U.S. economic data come in weak after the conclusion of the government shutdown, that's when gold and U.S. stocks would "likely part ways," Koos told MarketWatch. "A gloomy economy would hurt corporate profits ... but would boost demand for gold as a hedge against uncertainty or renewed stimulus and inflation risk," he said.
Fresh economic data have been harder to come by, given the pause in government releases as the shutdown has dragged on.
Read: Here's when to expect shutdown-delayed jobs and inflation reports once the government reopens
Still, there have been signs of a weakening U.S. labor market, with private-sector employers shedding an average of 11,250 jobs a week in the four weeks ending Oct. 25, according to the latest high-frequency data collected by ADP Inc. $(ADP)$
Some investors believe that an end to the government shutdown will "unleash a flood of gloomy economic data," said Adrian Ash, director of research at BullionVault. Like StoneX's Razaqzada, he thinks a weaker economy should be bad for stocks - though "cheap money is a bigger driver," he added, speaking to hopes for lower borrowing costs.
Coupled with Friday's "miserable reading" of the University of Michigan's consumer-sentiment index, expectations for weak economic data have been boosting bets that the Fed will cut interest rates again in December, driving gold and stocks higher together, said Ash.
At the same time, an actual end to the shutdown might "dial down the temperature of the fear trade," said Libertas Wealth's Koos - suggesting that could lead to a decline for gold prices, which have been supported by that fear trade.
There are a lot of potential gold sellers at the $4,000 level, who have been waiting for prices to get back up toward record highs so they can take profits at a "nice, round number," Koos said. The big question, he added, is whether the market and traders have enough pent-up demand to push gold prices higher from here.
-Myra P. Saefong
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November 12, 2025 07:30 ET (12:30 GMT)
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