Gold prices reached an unprecedented milestone on Tuesday, hitting $4,000 for the first time, as investors sought refuge amid a weakening US dollar, persistent geopolitical volatility, economic uncertainty, and ongoing inflation concerns. Gold futures closed at a record $4,004.40 per ounce, having touched an intraday high of $4,014.60. The price of gold has risen by approximately 50% this year, coinciding with a 10% decline in the US dollar index and global trade uncertainties.
Central banks and retail investors are driving considerable demand for gold. Countries like China are diversifying their holdings away from US Treasuries and increasing their gold reserves, a trend that accelerated after the imposition of sanctions on Russia in 2022. Simultaneously, retail investors are seeking a hedge against inflationary pressures by investing in gold.
The recent surge in gold prices followed the Federal Reserve’s decision to cut interest rates in September, making short-term debt instruments like Treasury bills less appealing to investors. The market anticipates two additional reductions in the federal funds rate, currently between 4.00% and 4.25%, before the end of the year. The Federal Reserve is scheduled to convene in three weeks, on October 29.
