Spot gold smashed through $4,000 an ounce for the first time, as concerns over the U.S. economy and a government shutdown added fresh momentum to a scorching rally.
It’s a milestone for bullion, which traded below $2,000 just two years ago, with returns that now outstrip those for equities this century. Gold has jumped more than 50 per cent this year in the face of uncertainties over global trade, the Federal Reserve’s independence and U.S. fiscal stability.
Heightened geopolitical tensions have also boosted demand for haven assets this year, while central banks have continued to buy the precious metal at an elevated pace.
The rally has taken on extra urgency as investors seek protection from potential market shocks following the government funding impasse in Washington. The start of the Fed’s monetary easing cycle has also been a boon for gold, which doesn’t pay interest. Investors have responded by piling into exchange-traded funds, with bullion-backed ETFs seeing their biggest monthly inflow in more than three years in September.
“Gold breaking $4,000 isn’t just about fear — it’s about reallocation,” said Charu Chanana, a strategist at Saxo Capital Markets Pte. “With economic data on pause and rate cuts on the horizon, real yields are easing, while AI-heavy equities look stretched. Central banks built the base for this rally, but retail and ETFs are now driving the next leg.”
Bullion climbed as much as 0.7 per cent to $4,010.84 an ounce on Wednesday and was trading at $4,009.75 as of 10:56 a.m. in Singapore.
Jumps in the price of gold typically track broader economic and political stresses. The metal breached $1,000 an ounce in the aftermath of the global financial crisis, $2,000 during the COVID pandemic, and $3,000 as the Trump administration’s tariff plans washed over global markets in March.
The precious metal has now broken past $4,000 against the backdrop of, among other things, U.S. President Donald Trump’s assault on the Fed, including threats against Chair Jerome Powell and a push to oust Gov. Lisa Cook, the clearest test so far of the U.S. central bank’s autonomy.
A pliant Fed that would lower rates and spur higher inflation could set up a Goldilocks situation for gold. Bullion is seen as an inflation hedge and is usually weighed down by high borrowing costs, which make cash or bonds more appealing.
“We expect gold to reach a cyclical peak when there is greatest market concern about the outlook for Fed independence,” Macquarie Bank Ltd. analysts wrote in a Sept. 30 note. “In the event, however, that a compromised Fed were to make clear policy errors, gold’s performance should of course be even stronger.”
Bullion is on pace for its best annual performance since the 1970s, a decade when rapid inflation and the end of the gold standard sparked a 15-fold rally of the precious metal. At that time, then-President Richard Nixon pressured the Fed to lower rates. The central bank under then-chair Arthur Burns made only “limited efforts” to maintain independence and ultimately enabled volatile inflation for “political reasons,” according to a recent court submission from various monetary policy luminaries.
“The reason that investors are buying gold — and should be buying gold — is because of its diversification qualities,” said Stephen Miller, an investment strategy adviser at GSFM. “That sentiment is in its early stages, and gold will get increasing acceptance as part and parcel of prudent investing behaviour,” he said, adding he could see prices reaching $4,500 by the middle of next year.
Billionaire Ray Dalio said Tuesday that gold is “certainly” more of a safe haven than the dollar and the record-setting rally echoes the 1970s. The remarks from the founder of hedge-fund firm Bridgewater Associates came after Citadel founder Ken Griffin said that bullion’s rise reflected anxiety about the U.S. currency.
“The metal’s climb to the $4,000 milestone reflects not only surging safe-haven demand, but also a deepening distrust in paper assets as fiscal risks and geopolitical tensions intensify,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. “In the short term, a consolidation phase looks likely after such a relentless advance.”
Central banks have been a key driver of bullion’s rally, flipping from net sellers to net buyers following the global financial crisis. The pace of buying doubled after the U.S. and its allies froze Ria’s foreign-exchange reserves in 2022 following the full-scale invasion of Ukraine. That pushed many central banks to consider diversifying, while inflation and speculation that the American government would treat foreign creditors less favourably further highlighted bullion’s appeal to policymakers.
Elevated central bank buying is a “structural shift in reserve management behaviour, and we do not expect a near-term reversal,” Lina Thomas, a commodities strategist at Goldman Sachs Group Inc., wrote in a September note. “Our base case assumes that the current trend in official sector accumulation continues for another three years,” Thomas said.
Goldman raised its gold forecast for December 2026 to $4,900 an ounce this week, up from $4,300.
Among other precious metals, silver climbed 1.1 per cent to $48.37 an ounce, while platinum and palladium advanced. The Bloomberg Dollar Spot Index rose 0.2 per cent.
—With assistance from Jake Lloyd-Smith, Doug Alexander, Mark Burton, Andrew Janes and Yihui Xie.
