Gold has hit a new record high, surging past $4,000 an ounce. This big jump happened early Wednesday in Asian markets for spot gold, which is what you buy right away. Gold futures, a way to bet on future prices, reached the same level back on October 7. This climb shows that investors around the world are looking for safe places to put their money when the economy feels shaky.
This is the biggest increase for gold since the 1970s. Its value has gone up more than 25% since April. That’s when former U.S. President Donald Trump announced new taxes on imported goods, which stirred up global trade worries. Another concern for investors is the delay in getting important economic information. The U.S. government has been shut down for two weeks, keeping that data from coming out.
People often see gold as a “safe haven.” This means it’s expected to hold its value, or even go up, when markets are wild or the economy slows down. Christopher Wong, an expert on interest rates at OCBC Bank in Singapore, said the U.S. government shutdown is “a boost for gold.” Investors often turn to gold during these shutdowns. For example, gold prices went up nearly 4% during a month-long shutdown when Trump was first in office.
Heng Koon How, who leads market strategy at UOB Bank, noted that gold’s rise last month was “unprecedented” and surprised many experts. He added that the higher prices are also tied to a weaker U.S. dollar. Plus, more everyday buyers, not just big pros, are purchasing gold.
But gold isn’t always a sure thing. Experts say prices could drop if interest rates go up or if global tensions and political problems calm down. Wong mentioned that gold “is usually seen as a shield against uncertainty, but this shield can be taken down.”
He gave an example from April. Gold prices fell about six percent after Trump decided not to fire Jerome Powell, who leads the U.S. central bank, known as the Federal Reserve. Heng pointed out that in 2022, gold’s value dropped from $2,000 to $1,600 an ounce. This happened after the Federal Reserve raised interest rates to control the high prices caused by the COVID-19 crisis.
A big risk for gold’s current rise would be if inflation suddenly returned. That could make the Federal Reserve raise interest rates again. However, Wong believes the recent increase in gold prices suggests that people expect the Federal Reserve to actually lower interest rates soon. Lower rates usually make gold more appealing to investors.
Source: BBC