Gold soared past $4,000 an ounce for the first time on Tuesday, extending a blistering rally that has lifted the precious metal more than 50 per cent this year, as investors seek refuge from intensifying geopolitical tensions, economic uncertainty and persistent inflation.
Gold futures were last trading at $4,005.80 per ounce, buoyed by a wave of safe-haven demand following renewed volatility in global markets and concerns about U.S. economic management. The rally has been fuelled in part by aggressive central bank purchases and mounting fears over the independence of the Federal Reserve, as President Donald Trump’s economic policies continue to unsettle investors.
Government buyers, particularly in emerging markets, have accelerated gold accumulation in recent months to hedge against potential U.S. sanctions and dollar dominance risks. At the same time, retail investors are piling in to shield savings from inflationary pressures and falling real yields.
The latest leg higher followed the Federal Reserve’s September interest rate cut, which reduced the appeal of bonds and other income-bearing assets. Markets are now pricing in two further rate cuts before year-end, expectations that have amplified gold’s allure as an alternative store of value.
“Debt instruments are not an effective store of wealth in this environment,” said Ray Dalio, founder of Bridgewater Associates, speaking at the Greenwich Economic Forum in Connecticut. Dalio suggested investors allocate “something like 15 per cent” of their portfolios to gold, calling it “the one asset that does very well when the typical parts of your portfolio go down.”
While the bullish momentum shows little sign of abating, some analysts are beginning to question whether the rally has gone too far, too fast. Bank of America warned clients on Monday that gold’s rapid ascent could be nearing “uptrend exhaustion,” predicting a potential consolidation or correction in the fourth quarter.
Oil windfall expectations from the Middle East crisis