Gold smashes US$4,000 milestone for first time in record run

Bengaluru - Gold extended its historic rally to break above US$4,000 an ounce for the first time on Oct 8, as investors piled into the safe haven to seek cover from mounting geopolitical uncertainty while betting on more US interest rate cuts.

Spot gold jumped 1.2 per cent to US$4,032.46 per ounce by 0653 GMT. US gold futures for December delivery climbed 1.3 per cent to US$4,054.80 per ounce.

Traditionally, gold is seen as a store of value during times of instability. Spot gold is up 53 per cent year-to-date after rising 27 per cent in 2024.

“There’s so much faith in this trade right now that the market will look for the next big round number which is 5,000 with the Fed likely to continue to lower rates,” said independent metals trader Tai Wong.

“There will be some bumps in the road like a lasting truce in the Mid-East or Ukraine, but the fundamental drivers of the trade, massive and growing debt, reserve diversification, and a weaker dollar, are unlikely to change in the medium term,” he said.

The metal’s rally has been driven by a cocktail of factors, including expectations of interest rate cuts, ongoing political and economic uncertainty, solid central bank buying, inflows into gold exchange-traded funds (ETFs) and a weak US dollar.

The US government shutdown entered its seventh day on Oct 7. The shutdown has postponed the release of key economic indicators from the world’s biggest economy, forcing investors to rely on secondary, non-government data to gauge the timing and extent of Fed rate cuts.

Investors are now pricing in a 25-basis-point cut at the Fed meeting on Oct 28 and 29, with an additional 25-basis-point cut anticipated in December.

“Rising uncertainty levels tend to fuel gains in the gold price and we are seeing this theme play out again,” said KCM Trade chief market analyst Tim Waterer.

“Market dynamics of lower US interest rates and the ongoing government shutdown are still working in favour of gold. But the temptation to take profits around the US$4,000 mark poses a potential short-term risk.”

A “fear of missing out” is also boosting the rally, analysts say.

Additionally, political turmoil in France and Japan has also boosted demand for the safe haven bullion.

“The latest leg higher has been sparked by the election of Sanae Takaichi over the weekend and the prospect of deeper deficit spending in Japan. That itself ties into a key theme at the moment: the ‘run it hot’ trade,” said Capital.com analyst Kyle Rodda.

Analysts expect strong inflows into ETFs backed by physical gold, central bank buying and the prospect of lower US interest rates to support gold prices in 2026, prompting

Goldman Sachs and UBS to raise their price outlooks

.

Globally, gold ETFs saw their largest quarterly inflows on record during the three-month period ending in September, according to a report from the World Gold Council on Oct 7.

Inflows into gold ETFs jumped 23 per cent to US$26 billion (S$33.7 billion) quarter over quarter, with a record US$17.3 billion in September alone.

Year to date, global inflows into gold ETFs hit US$64 billion.

That is a dramatic reversal from recent trends: over the last four years when gold ETFs have seen outflows totalling US$23 billion, the World Gold Council calculated.

Analysts said investors also hope gold can cushion big gains they may have seen in 2025 as the artificial intelligence boom sent stocks soaring.

“There’s a kind of ‘barbelling’ here, where gold becomes a hedge against any failure of the AI-driven tech boom to deliver on its promises and the policy implications of a crash,” said Macquarie Group’s global currencies and rates strategist Thierry Wizman. REUTERS