Gold surges past record $4,000 an ounce as uncertainty fuels rally

The price of gold has reached a record high of more than $4,000 (£2,985) an ounce, as investors look for safe places to put their money amid concerns about economic and political uncertainty around the world.

Gold witnessed its largest rise since the 1970s, rising by about a third since April when US President Donald Trump announced tariffs that disturbed global trade.

Analysts say another problem that worries investors is the delay in issuing key economic data US government shutdown Entering its second week

Gold is viewed as a so-called safe haven investment, which is expected to maintain or increase its value during times of market turmoil or economic downturn.

At the same time, the Bank of England (BoE) warned that the value of AI technology companies “appears to be stretched” as the risk of a “sharp correction” in financial markets increases.

Stock markets in the US, UK and Europe have hit record highs recently, as investors try to capitalize on the rise in technology companies. A correction can be defined as a decrease in these indicators by more than 10%.

The spot gold price — the real-time market value of the precious metal for immediate delivery — rose to more than $4,036 an ounce Wednesday afternoon in Asia.

Gold futures – which serve as a gauge of market sentiment – reached the same level on October 7. Futures contracts are agreements to buy or sell an asset at a predetermined date in the future.

The US government shutdown, triggered by recurring impasses over public spending, is a “tailwind for gold prices,” said OCBC Bank’s Christopher Wong, an interest rates strategist at the Singapore-based bank.

Investors turned to safe-haven assets such as gold during previous US government shutdowns.

It rose about 4% during the month-long shutdown of Trump’s first term in the White House.

Gold prices could fall if the lockdown ends more quickly than some investors expect, Wong said.

Heng Kun How, head of markets strategy at UOB Bank, said gold’s “unprecedented rise” last month exceeded analysts’ expectations.

He added that the rise is also related to… Weakening the US dollar More non-professional buyers, known as retail investors, are buying gold.

Although the current rise in gold prices has been due to short-term uncertainty, the overall strength of gold is largely due to central banks buying it as a strategic move away from US Treasuries and over-reliance on the strength of the dollar.

Central banks have They have collectively purchased more than 1,000 tons of gold annually since 2022Up from an average of 481 tons per year between 2010 and 2021. Poland, Turkey, India, Azerbaijan and China were among the main buyers last year.

Not everyone who invests in gold is buying the physical precious metal.

Some investors put their money into financial products, such as exchange-traded funds (ETFs), backed by gold.

A record $64 billion has been invested in gold ETFs so far this year, according to the World Gold Council trade association.

Gregor Gregersen, founder of precious metals trader and storage provider Silver Bullion, said he had seen client numbers more than double in the past year.

He added that individual investors, banks and wealthy families are increasingly turning to gold, as they view it as an insurance against global economic uncertainty.

“Gold will go down at some point, but I think given the economic environment, it is on an upward trend for at least five years,” Gregersen said.

OCBC’s Wong said the value of gold could fall if there is a rise in interest rates or if geopolitical tensions and political uncertainties ease.

He added that in April, for example, the price of gold fell by about 6% after Trump backed down from firing Federal Reserve Chairman Jerome Powell.

“Gold is often seen as a hedge against uncertainty, but the hedge can be unhedged.”

And in 2022 gold UOB’s Mr. UOB said the value fell from $2,000 to $1,600 an ounce, after the US central bank raised interest rates to curb inflation caused by the Covid-19 pandemic. heng.

He added that one of the main risks to gold’s current rally is a sudden rise in inflation, which could prompt the Federal Reserve to raise interest rates.

Wong said the recent rise in gold prices reflects expectations that the Federal Reserve will cut interest rates, making gold more attractive.

Meanwhile, Trump ramped up pressure on the Fed, publicly criticizing Powell for not cutting interest rates fast enough and trying to fire Fed Governor Lisa Cook.

The president’s targeting of the Fed could “undermine confidence in the Fed.” [its] “The ability to act as a credible, inflation-targeting central bank,” Mr Wong said.

He added that in such an environment, gold’s role as a hedge against uncertainty “acquires renewed importance.”

The UK central bank also raised concerns about the global tariff war and the credibility of the Federal Reserve.

While British banks are broadly giving a clean bill of health in terms of resilience to potential shocks, the Bank of England’s Financial Policy Committee said the record concentration of stock markets on a handful of big technology companies also represents a risk.

“A sudden or significant change in perceptions of the Fed’s credibility could lead to a sharp repricing of US dollar assets, including in US sovereign debt markets, with the potential for increased volatility, risk premiums and global spillovers,” the committee said.

The committee assesses all financial risks to the economy and recommends whether banks should take steps to protect financial stability.

In its regular assessment of financial stability, the committee has identified the still-high valuations of the world’s largest technology companies, especially those focused on artificial intelligence in the United States, as a concern.

The panel said some profit metrics were “comparable to the peak of the dot-com bubble,” which ended in a massive crash at the turn of the millennium.

“On a number of measures, stock market valuations appear overstated, particularly for technology companies focused on artificial intelligence,” the committee said in its report.

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