Gold Hits Historic High Above $4,000 as Political Turmoil and Policy Uncertainty Fuel Haven Demand

TradingKey - On October 8, spot gold prices broke through $4,000 per ounce for the first time in history, briefly hitting a record high of $4,040. December-delivery New York gold futures also set a new all-time high at $4,063.

Gold has continued to surge this year, climbing 53% year-to-date and becoming one of the world’s best-performing assets. Market analysts believe that ongoing concerns over global economic and political uncertainty continue to drive gold higher.

Recently, the focal point of this anxiety has been the U.S. government shutdown. Analysts say that as the government closure enters its second week, investors are worried about delays in the release of key economic data. In the absence of clear economic indicators, speculation about the Federal Reserve’s future policy direction has intensified, and this uncertainty is supporting safe-haven asset gold. According to the BBC, during the month-long U.S. government shutdown in Trump’s first term, gold prices rose nearly 4%.

Beyond the U.S., political turmoil in other parts of the world is also pushing gold prices higher. On October 6 local time, French Prime Minister Sébastien Lecornu submitted his resignation to President Emmanuel Macron, less than 30 days after taking office. Macron has since accepted the resignation. Analysts believe his departure undermines France’s fiscal deficit control plans.

In the Asia-Pacific region, Sanae Takashi, the newly elected president of Japan’s ruling Liberal Democratic Party, is almost certain to become the next prime minister. She advocates expansionary fiscal policies and a right-leaning political stance, calling for the continuation of loose monetary policy and opposing a rate hike by the Bank of Japan—adding uncertainty to Japan’s economic outlook.

Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP SA, pointed out that the political upheavals in France and Japan have heightened market concerns about fiscal risks, fueling gold’s rebound. She said the recent rise in gold has been driven jointly by retail demand in Europe and Japan and institutional capital inflows, with risk-averse sentiment boosting the U.S. dollar while simultaneously prompting investors to shift into gold.

Despite gold’s current strong rally, Christopher Wong, interest rate strategist at OCBC Bank in Singapore, warned that if the government shutdown ends faster than some investors expect, gold prices could fall.

Heng Koon How, head of market strategy at United Overseas Bank, said that if interest rates rise or geopolitical tensions and political uncertainty ease, gold prices could decline. He added that a key risk to gold’s current rebound is a sudden resurgence of inflation, which could prompt the Federal Reserve to raise interest rates.