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Gold’s relentless rise reached another milestone on Wednesday as the precious metal hit $4,002.95 (Rs 3.37 lakh) an ounce for the first time.
“Investors continue to bid up the price of gold, with the precious metal rising more than 50 percent year to date and nearly 12 percent in September alone – one of the strongest monthly performances on record,” said Richard Flax, chief investment officer at wealth manager Moneyfarm.
Below AFP examines the reason for the surge in demand.
What’s driving gold’s surge?
Gold is traditionally viewed as a safe-haven investment, helping to fuel demand amid geopolitical unrest driven by the Russia-Ukraine war and Israel-Gaza conflict.
The US government shutdown and expectations of more cuts to Federal Reserve interest rates, which is weighing on the dollar, are lending additional support to gold, according to analysts.
Concerns over the Fed’s independence, caused by President Donald Trump’s attacks on the US central bank for supposedly not cutting fast enough, are another boost for the metal.
There are also worries over mounting government debt in major economies and uncertainty created by Trump’s tariffs.
Who is buying gold?
In July, the World Gold Council (WGC) reported that gold demand showed annual growth of three percent in the second quarter to 1,249 tonnes thanks to “an increasingly unpredictable geopolitical environment and price momentum”.
The industry body added that central bank buying was “at significantly elevated levels due to ongoing economic and geopolitical uncertainty”.
There has also been strong demand for gold via exchange-traded funds on stock markets.
ETFs allow investment without trading on the gold futures market.
“While early gains this year were driven by tariff-induced volatility in the second quarter, recent momentum has been fuelled by strong sentiment and record inflows into gold-backed exchange-traded funds,” Flax said.
Impact Shorts
More ShortsThe high-price environment has, however, dampened jewellery demand, according to the WGC.
Other assets in demand?
Gold is not the only asset enjoying a record run higher, with major stock markets and bitcoin also hitting fresh peaks.
Bitcoin’s record high Sunday comes “as gold continues its surge, suggesting that investors around the globe continue to look for diversification, though with stocks at record highs too there looks to be plenty of liquidity to go around”, noted Chris Beauchamp, chief market analyst at trading platform IG.
The cryptocurrency topped $126,000 (Rs 1.06 crore) for the first time Tuesday, while Wall Street along with the London and Tokyo stock markets have all hit new records in recent sessions.
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