OCT 8 – The price of gold has hit a record high of more than $4,000 (£2,974) an ounce as investors look for safe places to put their money over concerns about economic and political uncertainty around the world.
The precious metal has seen its biggest rally since the 1970s, rising by more than 25% since April when US President Donald Trump announced tariffs which have upset global trade.
Analysts point to delays in the reporting of economic due to the US government shutdown as another reason for the rise.
Gold is seen as a so-called safe haven investment, which is expected to retain or increase its value in times of market turbulence or economic downturns.
The price of spot gold – the amount you receive if you sell the precious metal over the counter – hit $4,000 for the first time on Wednesday morning in Asia.
Gold futures – which serve as a gauge of market sentiment – reached the same level on 7 October. Futures are agreements to buy or sell the asset at a pre-determined date in the future.
The US government shutdown, which was triggered by repeated impasses over public spending, is a “tailwind for gold prices”, said OCBC’s Christopher Wong, who is the Singapore-based bank’s rates strategist.
Investors have turned to safe haven assets like gold during previous US government shutdowns.
It rose by nearly 4% during the month-long shutdown in Trump’s first term in the White House.
But gold prices could fall if the shutdown ends more quickly than some investors are expecting, said Mr Wong.
Gold’s “unprecedented rally” in the past month has surpassed analysts’ expectations, said UOB bank’s head of markets strategy Heng Koon How.
He added that the rise is also tied to the weakening US dollar and more non-professional buyers, known as retail investors, purchasing gold.
Gregor Gregerson, the founder of precious metals dealer and storage provider Silver Bullion, said he has seen customers numbers more than double in the last year.
Getty ImagesRetail investors, banks and wealthy families have increasingly turned to gold, viewing it as a safeguard against global economic uncertainty, he said.
“Most of our clients are long-term holders,” Mr Gregersen added, explaining that the majority of his customers store their gold for more than four years.
“Gold will fall at some point, but I believe given the economic environment, it’s on an upward trend for a least five years,” he said.
As Mr Gregersen highlighted, gold prices fall as well as rise.
Its value plunged from $2,000 to $1,600 per ounce in 2022, after the US central bank raised interest rates to curb the inflation which was triggered by the Covid-19 pandemic, said Mr Heng.
A key risk to gold’s current rally is a sudden resurgence in inflation, which could prompt the Federal Reserve to raise rates, he added.
The recent climb in gold prices reflects expectations that the Fed will lower interest rates, making gold more attractive, said OCBC’s Mr Wong.
Meanwhile, Trump has ramped up pressure on the Fed, publicly criticising Chair Jerome Powell for not cutting rates quick enough and attempting to oust Fed Governor Lisa Cook over allegations of mortgage fraud.
The president’s targeting of the Fed can “undermine confidence in the [its] ability to act as a credible, inflation-targeting central bank,” said Mr Wong.
In such an environment, gold’s role as a hedge against uncertainty “gains renewed importance,” he said.
By BBC
