Gold prices soared to a record $4,000 per ounce Tuesday, marking a historic milestone as investors worldwide seek refuge from mounting geopolitical and economic risks.
The rally, which has seen gold climb more than 50% this year, is being fueled by a combination of central bank purchases, robust demand from retail investors, and expectations of further interest rate cuts by the Federal Reserve.
Bret Kenwell, eToro US Investment Analyst, said tariff uncertainty, stubborn inflation and a falling US dollar have also played a part, while uncertainty around the government shutdown - now in its second week - and prospects of lower interest rates have only "seemed to fan the flames" of this year’s rally.
"While gold might be running hot now, investors should remember that it’s not just a 2025 story," he said. "In fact, gold has outperformed the S&P 500 in four of the last seven years and is on pace to add another tally to the 'win' column. That’s saying something too, with the S&P 500 working on its seventh double-digit return in the last nine years."
He added: "Gold is on pace for its best one-year rally in almost fifty years, so it’s only natural to say that the rally could use a rest — and it could. But gold is a tricky asset at times. After flailing through the 80s and 90s, it went on a 12-year win streak, gaining more than 500% in the process. For perspective, gold is working on a three-year win streak with a gain of ~120%. If the long-term catalysts remain in play, gold may have more room to run in the years ahead."
The current environment, marked by a weaker dollar and rising trade tensions, has only intensified demand for gold-backed ETFs and physical bullion.
Central banks have played a significant role in the rally, with China’s central bank adding to its reserves for the 11th consecutive month in September. This trend reflects a broader move among countries to diversify away from US Treasuries, particularly after Washington imposed sanctions on Russia. Retail investors, meanwhile, are seeking protection from persistent inflation and the potential for further market shocks.
The lack of official government data due to the shutdown has forced traders and policymakers to rely on secondary sources to gauge the health of the economy and the likely path of interest rates. Markets are currently pricing in a quarter-point cut at the Federal Reserve’s late October meeting, with another reduction anticipated in December.
Tom Winmill, portfolio manager of the Midas Discovery Fund (MIDSX), has more than 20 years' experience navigating gold cycles and he believes the current surge in gold is not merely speculative, but structurally supported.
He said: "We expect a peak in gold prices as soon as the US government eliminates deficit spending and reduces its public debt to less than 50% of GDP - in other words, no time soon!
"But, [it's] not impossible. At the end of 2007, US public debt to GDP was approximately 35%, when total public debt was about $5 trillion and GDP was approximately $14.5 trillion. By the end of 2008, frantic US government spending increased debt to about $10 trillion, while GDP was about the same, so 65% debt to GDP, and it has been one-way traffic ever since. Today, the estimates are US public debt is $34 trillion and US GDP is $29 trillion, so the percentage is 117%."
Despite this prognosis, some industry leaders are urging caution. Bank of America recently advised clients that gold’s rapid ascent could lead to “uptrend exhaustion,” potentially resulting in a period of consolidation or correction in the coming months.
Institutional investors are also weighing in. CNBC reports that Ray Dalio, founder of Bridgewater Associates, suggested at a recent economic forum that investors should allocate “something like 15% of your portfolio in gold,” arguing that traditional debt instruments are “not an effective store of wealth.”
The rally has been further supported by political turmoil abroad. In France, the resignation of the prime minister has complicated efforts to address fiscal deficits, while political transitions in Japan have contributed to currency volatility. These developments have strengthened the dollar against the euro and yen, but have also added to the appeal of gold as a safe haven.
Goldman Sachs recently raised its price forecast for December 2026 to $4,900 per ounce, citing strong inflows into gold-backed ETFs and continued central bank buying.
As of Tuesday morning, spot gold was trading at $3,974.34 in New York, with prices on track for the largest annual gain since 1979.
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