Gold Surges to New Highs, Exceeding $4,200

Gold prices continued to reach new record levels yesterday, supported by increased expectations of a cut in U.S. interest rates, renewed U.S.-China trade tensions, and the repercussions of the U.S. government shutdown, which boosted the demand for safe havens, most notably gold.

By 12:53 GMT on Wednesday, spot gold rose 1.2% to $4188.95 an ounce after hitting an all-time high of $4217.95 earlier. U.S. gold futures for December delivery rose 1% to $4205.20.

According to Moheb Ya'qoub, Senior Market Analyst at "Scoop Markets," gold prices have reached historic levels, marking significant gains compared to the levels seen at the beginning of the year near $2620.

He explained that President Trump's statements about reimposing strict tariffs on Chinese imports contributed to heightened geopolitical worries and increased demand for safe assets, although this rise in gold prices is driven by deeper macroeconomic shifts.

One of the key drivers of current gold prices is the growing expectations that the Federal Reserve will ease monetary policy in 2025, especially following the recent labor market data, prompting markets to increasingly anticipate a shift toward lower interest rates.

Ya'qoub noted that ongoing concerns remain about the possibility of a prolonged U.S. government shutdown, undermining investor confidence in financial stability and boosting gold as a safe haven. He also highlighted that the shift toward reducing reliance on the U.S. dollar has supported the gold rally.

Central banks, especially in emerging markets, continued to strengthen their gold reserves as part of efforts to diversify assets and mitigate risks from U.S. currency movements, with net positive gold purchases recorded by central banks in 27 of the past 28 months, providing strong support for gold’s rise.

Ya'qoub confirmed that more investors are turning to gold as a hedge against long-term inflation and declining currency purchasing power. This is amid ongoing high sovereign debt levels and worsening fiscal deficits in many major economies, reviving concerns about the erosion of fiat currency value.

Matt Simpson, Global Market Analyst at "Stone X", believes the U.S. government shutdown and the dovish statements from Jerome Powell, Federal Reserve Chairman, have provided the latest reasons for gold's rapid rise.

Powell clarified that the U.S. labor market remains weak and that interest rate decisions will be made meeting by meeting to balance between labor market weaknesses and inflation exceeding targets.

Simpson noted that current market expectations almost certainly predict a 25 basis point rate cut in October and December, according to market pricing data.

He explained that gold benefits from global chaos, thriving in low-interest environments and times of political and economic turmoil. Gold classified as a safe haven rose by almost 60% since the beginning of the year, supported by multiple factors.

These include geopolitical and economic tensions, expectations of U.S. rate cuts, strong central bank purchases, decoupling from the dollar, and high inflows into exchange-traded funds, concluding that this rise has now become a momentum-based trade.

John Hardy, Head of Global Macro Strategy at "Saxo Bank," stated that fourth-quarter forecasts for the current year include several factors that give gold more momentum, most notably a potential weakening of the U.S. dollar.

There are also increasing risks of a U.S. recession and cautious outlooks for stocks, where U.S. valuations seem high, while the AI investment cycle may be approaching a tipping point.

He said gold has risen significantly this year, reflecting investor concerns about global debt and inflation, and "Saxo Bank" maintains long-term positive expectations, with the potential for prices to rise given the challenges to central bank independence.