Rally continues amid weaker dollar, central bank buying, U.S. shutdown and global uncertainty
Gold surged to a new all-time high on Tuesday, climbing above the $4,000 mark for the first time ever, as ongoing political gridlock in Washington and growing economic uncertainty fuel investor demand for safe-haven assets.
The continuing U.S. government shutdown, triggered by the deadlock between the two chambers of Congress, together with investor confidence that the Federal Reserve will cut interest rates again later this month, have added strong support to the precious metal.
At 4:00 p.m. Greek time, December gold futures on the U.S. market were trading at $4,004.40 per ounce, breaching the $4,000 threshold for the first time. Meanwhile, the spot price gained 0.81% to reach $3,984.18 per ounce.
“The probability of rate cuts in October and December remains above 80%, which continues to support gold prices. The unresolved government shutdown in the U.S. is also keeping safe-haven demand strong,” said Kelvin Wong, senior market analyst at OANDA, speaking to CNBC.
Despite the rally, several Fed officials have adopted a more cautious tone in recent days, seeking to temper market expectations due to persistent inflation pressures. Jeff Schmid, President of the Kansas City Federal Reserve, stated that he is reluctant to endorse further rate cuts, emphasizing that the central bank must “remain focused on the risk of persistently high inflation” rather than on signs of a cooling labor market.
Nevertheless, market expectations remain firmly tilted toward monetary easing. According to the CME FedWatch tool, traders are pricing in a 95% chance of a 25-basis-point cut in October and an 83% probability of another in December.
If these forecasts are confirmed, analysts believe gold’s upward momentum will likely persist. So far this year, the precious metal has gained about 51%, driven by a weakening U.S. dollar, heightened geopolitical uncertainty, and robust gold purchases from central banks worldwide.
In a new report, Goldman Sachs raised its gold price forecast, predicting the metal could reach as high as $4,900 per ounce, up from its previous projection of $4,300.
