Gold extended its record-breaking rally on Monday, briefly touching $4,059 per ounce as trade frictions, geopolitical turmoil, and dovish Fed expectations fuel relentless safe-haven demand. With speculation mounting that the “king of hedges” could ultimately climb toward $8,500, the question is whether momentum remains strong enough to sustain this historic move.
Markets opened the week with a familiar theme: fear. Spot gold surged nearly 1% in early Asian trading, breaking above last week’s high to register another record peak. In times of uncertainty, investors instinctively turn to gold—and today’s backdrop is arguably one of the most complex in decades.
Trade tensions have reemerged as a core driver. President Trump’s vow to impose 100% tariffs on critical Chinese imports, coupled with export controls on software, shocked markets late last week. The dollar slid, Treasury yields tumbled, and gold’s appeal soared. This is not a new pattern—history shows that every flare-up in U.S.–China trade conflict tends to funnel capital into gold. But the scale of Trump’s latest threats has revived comparisons with the height of past trade wars, leaving investors little doubt that risk assets face renewed headwinds.
Beyond tariffs, geopolitics remains a constant tailwind. The Russia–Ukraine war has taken another sharp turn, with Washington weighing the delivery of Tomahawk missiles to Kyiv. Such a move would dramatically escalate tensions with Moscow, reinforcing fears of prolonged conflict. At the same time, ceasefire talks in the Middle East remain fragile. Drone and missile attacks over the weekend highlighted how quickly the region’s fragile balance can unravel.
For markets, these flashpoints have one common outcome: investors search for assets immune to political brinkmanship. Gold, unlike equities or currencies tied to fiscal promises, stands outside the reach of policy uncertainty. As analyst Alex Kuptsikevich noted, “When currencies and stocks depend on governments, metals remain independent.” This independence explains why central banks and ETFs have accelerated purchases, deepening structural support for the metal.
Monetary policy adds another layer of fuel. Traders now price a near-97% chance of a 25 bps Fed cut in October, with December seen as highly likely to follow. Lower yields reduce gold’s opportunity cost, while the U.S. government shutdown—which has already delayed key data releases—compounds uncertainty. The University of Michigan’s sentiment index fell for a third month, adding to concerns that the labor market is weakening.
Even Fed officials sound cautious. Waller acknowledged softening employment signals, while Musalem pointed to the need for further support. Though the Fed remains reluctant to move aggressively, even modest easing is enough to shift investor preference toward non-yielding safe havens. Historically, gold has thrived in such cycles—providing protection against both inflation risk and growth anxiety.
U.S. bonds and equities delivered another reminder last week of why gold remains central in portfolios. Yields on 10-year Treasuries dropped to their lowest since September, while equity markets endured their steepest weekly losses in months. The Dow fell nearly 2% on Friday, the S&P 500 slid 2.7%, and the Nasdaq collapsed 3.6% as traders sold first and asked questions later.
In the words of Carson Group’s Ryan Detrick, markets reacted with a “sell now, explain later” mindset. Such episodes amplify volatility, creating precisely the environment in which gold excels. Investors see it not just as a hedge but as an anchor—one of the few assets whose behavior becomes more reliable as others grow more erratic.
Uncertainty is not confined to the U.S. In France, political paralysis continues as Prime Minister Lecornu struggles to consolidate power against a hostile parliament. Threats of impeachment, along with leadership changes in Japan, have further unsettled sentiment. While these may appear as local events, their global echo is clear: political fragility feeds into financial market caution. The result is another indirect lift for gold demand.
Technically, the market remains stretched but not exhausted.
In short, gold is consolidating gains near record highs, not yet flashing signs of reversal.
Some long-term projections—such as Eurizon Capital’s scenario equating gold’s reserve role with the dollar’s—suggest prices could eventually climb to $8,500. While such forecasts are extreme, they highlight the conviction that this rally is not purely speculative. Structural shifts—central bank diversification, geopolitical fragmentation, and the erosion of faith in fiat currencies—are powerful forces that may carry gold higher over the next few years.
For the immediate horizon, however, consolidation seems more likely. Expect sideways trading around $4,000–$4,080 as markets digest trade rhetoric, Fed decisions, and political developments.
Given ongoing structural support, it likely reflects consolidation. Exhaustion would only be confirmed if $4,000 support breaks decisively.
A quick rebound would suggest stop-run dynamics and dip-buying strength; failure to recover would warn of a deeper correction.
Both matters, but history shows geopolitics often accelerates short-term moves, while Fed policy defines the broader trend.
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This post was last modified on Oct 13, 2025, 07:07 BST 07:07