Onome Amuge
Gold rode to a fresh record this week, climbing above $3,818for the first time, as investors sought refuge from mounting geopolitical risks spanning the Middle East, Ukraine and China. The metal gained more than 1 per cent on the day, extending a rally that has propelled it beyond previous peaks despite lingering inflation pressures in the US.
The latest advance reflects a shift in market psychology. Traditionally buoyed by expectations of monetary easing, gold’s rally now appears powered less by the prospect of lower interest rates and more by a flight to safety. Data last week confirmed sticky US inflation, reducing the odds of a cumulative 50-basis-point cut before year-end. Yet the bid for gold has only strengthened.
Concerns over a renewed flare-up between Israel and Iran sit at the heart of the rally. Alan Eyre, a former senior US diplomat now with the Middle East Institute, warned that another confrontation between the two adversaries was “very likely,” describing Tehran as an existential threat in Israel’s eyes.
Reports from the Associated Press indicate that Iran has begun rapidly rebuilding missile-production sites damaged by Israeli strikes during June’s conflict. While critical components such as planetary mixers for solid-fuel systems are yet to be replaced, China is seen as a potential supplier, sustaining Tehran’s determination to restore its deterrence capacity despite sanctions.
The geopolitical anxiety is reinforced by signals from Washington. The Washington Post reported that US defence secretary Pete Hegseth has ordered an unprecedented gathering of hundreds of generals and admirals in Virginia, with President Donald Trump expected to attend. The move, rare in modern US history, has drawn scrutiny over potential politicisation of the military at a time of heightened global risks.
In Europe, tensions are also rising. The New York Times reported that Russia has stepped up provocations through drone incursions into NATO states, naval confrontations in the Baltic Sea and disinformation campaigns in Moldova’s election. European officials worry that Moscow is testing alliance unity as Washington’s commitment is questioned.
Amid this backdrop, the Wall Street Journal noted that Trump signalled openness to allowing Ukraine to use long-range US weapons against targets inside Russia, a reversal from earlier restrictions. European leaders welcomed the shift, seeing it as vital reinforcement of Western resolve, though analysts warn it could open the door to dangerous cycles of escalation and counter-escalation.
Beneath the geopolitical drama, warning signs in the global economy are reinforcing demand for safe havens. Mark Skousen, writing in the Wall Street Journal, pointed to US gross output data showing business spending fell by an annualised 5.6 per cent in the second quarter, contrasting sharply with a headline GDP increase of 3.8 per cent. He argued that consumer demand alone cannot sustain growth when business investment, typically larger and more volatile, is weakening.
Investors will now turn to this week’s economic data ( including US job openings (JOLTS), ADP payrolls, nonfarm payrolls, and ISM surveys) for clues on whether the Federal Reserve can justify easing. Yet for now, market attention is fixed firmly on the risk map.
