Gold prices reached a record high exceeding $4,000 per ounce Wednesday as investors seek safe-haven assets amid concerns about economic and political uncertainty worldwide.
Gold has experienced its biggest rally since the 1970s, rising approximately one-third since April when President Donald Trump announced tariffs disrupting global trade. Analysts cite investor concerns about delays in key U.S. economic data releases as the government shutdown enters its second week.
Gold is considered a safe-haven investment expected to retain or increase value during market turbulence or economic downturns. The Bank of England warned that AI tech company valuations “appear stretched” with rising risk of a “sharp correction” to financial markets.
Stock markets in the U.S., UK, and Europe recently hit record highs as investors capitalize on tech company rallies. A correction would be defined as falls exceeding 10% in these indexes.
Spot gold prices. the real-time market value for immediate delivery, rose above $4,036 per ounce Wednesday afternoon in Asia. Gold futures reached the same level October 7. Futures are agreements to buy or sell assets at predetermined future dates.
The U.S. government shutdown, triggered by repeated public spending impasses, is a “tailwind for gold prices,” said Christopher Wong, OCBC’s Singapore-based rates strategist. Investors turned to safe-haven assets like gold during previous government shutdowns, with gold rising nearly 4% during Trump’s first-term month-long shutdown.
Gold prices could fall if the shutdown ends more quickly than investors expect, Wong said. Gold’s “unprecedented rally” in the past month has surpassed analysts’ expectations, said UOB bank’s head of markets strategy Heng Koon How, adding that the rise ties to the weakening U.S. dollar and increased retail investor purchases.
Although current gold price surges stem from short-term uncertainty, overall gold strength largely results from central banks buying it as a strategic move away from U.S. treasuries and over-reliance on dollar strength.
Central banks have collectively bought more than 1,000 tonnes of gold annually since 2022, up from an average 481 tonnes yearly between 2010 and 2021. Poland, Turkey, India, Azerbaijan, and China were among leading buyers last year.
Not all gold investors purchase physical metal. Some invest in financial products like exchange-traded funds backed by gold. A record $64 billion has been invested in gold ETFs this year, according to the World Gold Council trade association.
Gregor Gregersen, founder of Silver Bullion precious metals dealer and storage provider, said customer numbers have more than doubled in the last year. Retail investors, banks, and wealthy families have increasingly turned to gold, viewing it as a safeguard against global economic uncertainty.
“Gold will fall at some point, but I believe given the economic environment, it’s on an upward trend for at least five years,” Gregersen said.
Gold may fall if interest rates increase or geopolitical tensions and political uncertainties ease, said OCBC’s Wong. In April, gold prices fell approximately 6% after Trump backed off from firing Fed Chair Jerome Powell.
In 2022, gold’s value plunged from $2,000 to $1,600 per ounce after the U.S. central bank raised interest rates to curb Covid-19 pandemic-triggered inflation, said UOB’s Heng. A key risk to gold’s current rally is sudden inflation resurgence, which could prompt Federal Reserve rate increases.
Recent gold price climbs reflect expectations that the Fed will lower interest rates, making gold more attractive, Wong said. Trump has increased pressure on the Fed, publicly criticizing Powell for insufficient rate cuts and attempting to fire Fed Governor Lisa Cook.
Presidential targeting of the Fed can “undermine confidence in the [its] ability to act as a credible, inflation-targeting central bank,” Wong said. In such environments, gold’s role as uncertainty hedge “gains renewed importance.”
The Bank of England also raised concerns about the global tariff war and Fed credibility. While giving UK banks a broadly clean resilience bill against potential shocks, the BoE’s financial policy committee said record stock market concentration on a handful of big tech companies represented risk.
“A sudden or significant change in perceptions of Federal Reserve credibility could result in a sharp re-pricing of US dollar assets, including in US sovereign debt markets, with the potential for increased volatility, risk premia, and global spillovers,” the committee stated.
In its financial stability assessment, the committee identified soaring valuations of the world’s biggest tech companies, especially those focused on AI in the U.S., as a concern. The committee said on some profit measures, valuations were “comparable to the peak of the dotcom bubble,” which ended in a huge millennium-turn crash.
