Gold marked a new all-time high on Wednesday: On the spot market, the price for the yellow metal climbed above the $4,000 per troy ounce mark for the first time, reaching a new record high! The rally is driven by expectations of falling US interest rates, the continued budget deadlock in Washington, and political risks in Europe and Asia. Since the beginning of the year, gold – measured in US dollars – is up by more than 50%, making it one of the strongest asset classes of the year.
The Drivers of the Gold Rally
With the leap above the psychologically important $4,000 threshold, gold continued its months-long upward trend. Market participants point to the combination of falling real yields, a weaker US dollar, and persistent risk aversion. Futures markets are currently pricing in a US Federal Reserve interest rate cut in October, with a further reduction in December – an environment in which an interest-free “safe haven” like gold historically tends to receive tailwinds.
In parallel, funds flowed into gold-backed Exchange Traded Funds (ETFs) in recent weeks, while the price surge was additionally supported by physical buyers. Analysts see a mix of private investor demand – particularly in Europe and Japan – and institutional inflows as a key driver of the latest leg of the gold rally.
Shutdown Slows Data – and Supports the Gold Story
The “Government Shutdown” in the US, ongoing since early October, is causing an unusual data drought: Important economic reports – including labor market and inflation figures – are being postponed or not published at all. For the central bank, this means less insight into the economic situation; in the markets, it increases uncertainty about the timing and scope of the next steps. This lack of transparency fuels demand for hedging – from which gold benefits as a crisis and liquidity reserve. Simultaneously, the prospect of falling key interest rates strengthens the fundamental tailwind for the precious metal.
In the futures market, the situation is reflected in increased probabilities for a 25-basis-point step already this month and a further cut by year-end. While comments from individual Fed officials caution prudence, implicit money market expectations remain gold-friendly – at least as long as official data is missing.
Political Risks: France and Japan in Focus
In addition to the US budget deadlock, political developments in Europe and Asia are coming into focus. In France, recent government changes and discussions about possible new elections caused increased volatility in equity and bond markets; the risk premium of French government bonds over German Bunds recently widened. Such tensions favor a move towards safe havens – including gold.
In Japan, recent political shifts and the resulting expectations of a more expansionary fiscal policy triggered significant movements in foreign exchange and bond markets. The yen came under pressure, while discussions about the future path of the Bank of Japan brought new uncertainty. This constellation – a weaker currency, an unclear interest rate outlook – also tends to support demand for gold, not least among Asian private investors.
A structural factor of the rally: Central banks continue to expand their gold reserves. According to official figures, the People’s Bank of China (PBOC) made purchases for the eleventh consecutive month in September. This demand from central banks has a price-stabilizing effect and reduces short-term available supply in the market. In parallel, data providers and banks report renewed inflows into gold-backed funds – a signal that gold is gaining importance as a diversification component in portfolios.
Goldman Sachs Raises Gold Price Target to $4,900
On the part of investment houses, the industry is adjusting its assumptions to the new price level: Goldman Sachs raised its price target for gold to $4,900 per ounce by the end of 2026, citing ETF inflows and continued central bank purchases. Nevertheless, short-term fluctuations above the $4,000 mark remain possible – for example, due to profit-taking or abrupt position adjustments, should the interest rate or news situation change. For investors, this means: The price range could remain wider for now, while the medium-term discussion will be more influenced by monetary policy, currency developments, and official demand.
Conclusion: With the surpassing of $4,000 per ounce, gold has reached a new, significant milestone. The combination of the US shutdown and data gap, interest rate speculation, political risks in France and Japan, and structural demand from central banks and ETFs provides the currently supporting arguments. How sustainable this level is will largely depend on whether the Federal Reserve confirms the priced-in steps, how the political landscapes develop – and whether the inflows into physical gold and gold ETFs continue.
