Gold prices hit a record high above $4,000 (£2,985) an ounce as investors looked for safer places to put their money amid concerns about economic and political uncertainty around the world.
Gold has had its biggest rebound since the 1970s, rising by about a third since April when U.S. President Donald Trump announced tariffs that have thrown global trade into chaos.
Analysts say another issue worrying investors is the delay in the release of key economic data entering its second week due to the U.S. government shutdown.
Gold is considered a so-called safe haven investment and is expected to maintain or increase its value even during market turmoil or economic downturns.
Spot gold prices (the real-time market value of the precious metal for immediate delivery) rose above $4,021 an ounce in Asia on Wednesday afternoon.
Gold futures, which serve as a gauge of market sentiment, reached the same level on October 7. Futures are contracts to buy or sell an asset at a predetermined date in the future.
The U.S. government shutdown, triggered by repeated deadlocks over public spending, is a “tailwind for gold prices,” said Christopher Wong of OCBC, an interest rates strategist at the Singapore-based bank.
Investors turned to safe haven assets such as gold during previous U.S. government shutdowns.
That figure rose nearly 4% during the month-long shutdown during President Trump’s first term in the White House.
But gold prices could fall if the lockdown ends sooner than some investors expect, Mr Wong said.
Heng Koon How, head of market strategy at UOB Bank, said gold’s “unprecedented rise” last month surpassed analysts’ expectations.
He added that the rise was also linked to the weakening US dollar and gold purchases by non-professional buyers, known as retail investors.
Not everyone who invests in gold is purchasing the physical precious metal.
Some investors invest their money in financial products such as exchange-traded funds (ETFs) backed by gold.
According to the World Gold Council trade association, $64 billion has been invested in gold ETFs so far this year.
Gregor Gregerson, founder of Silver Bullion, a precious metals dealer and storage service provider, said the number of customers has more than doubled in the past year.
Retail investors, banks and wealthy families are increasingly turning to gold, seeing it as protection against global economic uncertainty, he said.
“Most of our customers are long-term holders,” Gregersen added, explaining that most customers store their gold for four years or more.
“Gold will decline at some point, but considering the economic environment, it will be on an upward trend for at least five years,” he said.
As Gregersen emphasized, gold prices go up and down.
OCBC’s Mr Wong said prices could fall if interest rates rise, geopolitical tensions or political uncertainty ease.
For example, he said, gold prices fell about 6% after President Trump withdrew his firing of Federal Reserve Chairman Jerome Powell in April.
“Gold is often seen as a hedge against uncertainty, but hedges can be unwound.”
And in 2022, gold A UOB bank said the value of the ounce had plummeted from $2,000 to $1,600 an ounce after the U.S. central bank raised interest rates to curb inflation triggered by COVID-19. Heng.
The main risk to rising gold prices now is a sudden resurgence in inflation, which could lead the Federal Reserve to raise interest rates, he added.
The recent rise in gold prices reflects expectations that the Federal Reserve will lower interest rates to make gold more attractive, Mr Wong said.
Meanwhile, President Trump has stepped up pressure on the Federal Reserve, publicly criticizing Powell for not cutting interest rates fast enough and attempting to fire Fed Governor Lisa Cook.
The president’s targeting of the Fed could “undermine confidence in the Fed’s ability to serve as a credible inflation-targeting central bank,” Mr. Wong said.
In such an environment, gold’s role as a hedge against uncertainty “gains new importance,” he said.
