Gold surpasses US$4,000 an ounce, hitting record high amid turmoil

Expectations of further U.S. Federal Reserve interest rate cuts also contributed to the rally.

Spot gold gained 0.7%, while US gold futures for December delivery rose by 0.7% to US$4,033.40 per ounce.

Gold is traditionally seen as a haven during periods of instability. So far this year, the metal has surged 53%, following a 27% increase in 2024.

Tai Wong, an independent metals trader, noted, "There’s so much confidence in this trade that the market may target the next milestone of US$5,000, especially if the Fed continues to lower rates." He also highlighted that while geopolitical tensions, such as the ongoing conflicts in the Middle East and Ukraine, may cause fluctuations, the fundamental drivers, massive debt, reserve diversification, and a weaker dollar, are unlikely to shift in the medium term.

This surge in gold prices is the result of several factors, including expectations of interest rate cuts, political and economic instability, strong central bank purchases, inflows into gold exchange-traded funds (ETFs), and a weakening dollar.

The ongoing US government shutdown, which entered its seventh day on Tuesday, has delayed the release of key economic data. This has led investors to turn to secondary indicators to anticipate when the Fed will act on rate cuts. Market expectations now suggest a 25-basis-point reduction at the Fed's meeting this month, with another 25-bp cut likely in December.

Tim Waterer, Chief Market Analyst at KCM Trade, remarked, "Rising uncertainty tends to boost gold prices, and we are witnessing this pattern again. While lower US interest rates and the government shutdown continue to benefit gold, there’s a potential short-term risk from profit-taking around the US$4,000 mark."

The "fear of missing out" (FOMO) effect is also contributing to the rally, according to analysts.

Political instability in countries like France and Japan has further fueled demand for gold. Kyle Rodda, an analyst at Capital.com, explained, "The latest upward move has been driven by Japan's election of Sanae Takaichi and the prospect of increased deficit spending, which ties into the current 'run it hot' trade."

Looking ahead, analysts expect strong support for gold in 2026, driven by robust ETF inflows, continued central bank purchases, and the likelihood of lower US interest rates. Both Goldman Sachs and UBS have raised their price forecasts for the precious metal.

Other precious metals also saw gains, with silver rising 1.3% to US$48.42 per ounce, platinum climbing 2.5% to US$1,658.40, and palladium increasing 1.8% to US$1,361.89.

Reuters