Safe-Haven Demand and Rate Cut Bets Propel Bullion to Record Highs
Singapore – Gold prices soared to an unprecedented high in Asian trading on Wednesday, breaching the $4,000 per ounce mark as a confluence of heightened political and economic uncertainties fueled safe-haven demand. Bolstering bullion’s ascent were growing expectations of further interest rate cuts by the U.S. Federal Reserve, with markets keenly awaiting addresses from several Fed officials this week.
Spot gold climbed 0.6% to touch a new record of $4,010.84 per ounce, while December gold futures advanced 0.7% to a peak of $4,033.27 per ounce, having already surpassed the $4,000 threshold on Tuesday.
“For the moment, markets are still pricing in a 25 basis point cut this month, which should benefit the precious metal. The political turmoil in France and Japan is adding to fiscal concerns and contributing to the rally in gold,” ANZ analysts noted. They also highlighted that “concerns about an overvaluation in equity markets also appear to be triggering a shift into gold-backed ETFs to diversify risk,” suggesting that ongoing ambiguity surrounding the U.S. economy is likely to keep gold well-supported.
Gold Underpinned by Haven Demand
The appetite for bullion has been significantly driven by escalating uncertainty surrounding the U.S. economy, as a government shutdown entered its second consecutive week. Despite mediation efforts by President Donald Trump, political deadlock in Congress over a funding bill showed little sign of resolution. White House officials have cautioned that this shutdown might have a more significant economic impact than previous ones.
Further stoking risk aversion is a mounting political crisis in France, following Prime Minister Sebastien Lecornu’s resignation shortly after announcing his cabinet. In Japan, concerns about expansive fiscal spending have intensified after Sanae Takaichi, a known fiscal dove, was elected as the leader of the ruling party. Takaichi is expected to resist interest rate hikes by the Bank of Japan and advocate for increased fiscal spending and tax breaks, raising questions about the funding of her agenda amidst souring investor sentiment towards Japanese government bonds.
Fed Speeches and Minutes in Focus
The ongoing government shutdown has delayed the release of several critical U.S. economic indicators, shifting market attention to private sector data, particularly on the labor market. Recent private readings indicated a sustained slowdown in jobs growth, reinforcing expectations of further rate cuts by the Fed.
The minutes from the Fed’s September meeting, due on Wednesday, are expected to provide additional insights into the central bank’s decision to cut rates by 25 basis points. According to CME Fedwatch, markets are currently pricing in a nearly 100% chance of another 25 basis point cut later in October. Several Fed officials are scheduled to speak in the coming days, with Chair Jerome Powell slated to deliver remarks on Thursday.
In the broader metals market, prices showed mixed signals on Wednesday. Precious metals generally rallied, with spot platinum climbing 2.1% to $1,661.36 per ounce and spot silver rising 1.4% to $48.4985, with both metals reaching more than decade highs. Conversely, copper prices retreated slightly from recent strong gains; benchmark copper futures on the London Metal Exchange fell 0.2% to $10,713.45 a ton, and COMEX copper futures dropped 0.1% to $5.0878 a pound. Copper had been supported by fears of a supply crunch due to an extended production outage at Indonesia’s Grasberg mine following a deadly accident in September.
