Gold prices have soared to an unprecedented $4,000 (Sh524,000) an ounce, marking the highest level ever recorded, as investors worldwide flock to the precious metal in response to deepening political and economic uncertainty.
The current surge represents the sharpest rally since the 1970s, with prices climbing more than 25% since April. The spike was triggered by tariffs announced by US President Donald Trump, which unsettled global trade and pushed investors to seek safer assets.
The delay in releasing key economic data due to the ongoing US government shutdown has further intensified the rush towards gold.
Spot gold, which reflects the price of selling the metal over the counter, broke the $4,000 (Sh524,000) barrier for the first time during Wednesday’s Asian trading session. Gold futures, which indicate investor sentiment through contracts to buy or sell at a set date, also reached this milestone on 7 October.
As reported by BBc, Christopher Wong, a rates strategist at OCBC Bank in Singapore, said the prolonged shutdown has become a “tailwind for gold prices.”
The shutdown, sparked by political deadlock over public spending, is entering its second week. Similar situations in the past have driven investors to safe haven assets, with gold gaining nearly 4% during a month-long government closure in Trump’s first term.
Wong cautioned, however, that prices could retreat if the shutdown ends sooner than expected.
Heng Koon How, head of markets strategy at UOB Bank, described the metal’s performance as an “unprecedented rally” that has outpaced forecasts.
He attributed the surge to a combination of a weakening US dollar and increased purchases by retail investors, individuals who are not professional traders.
Gregor Gregersen, founder of precious metals dealer and storage firm Silver Bullion, said his customer base has more than doubled in the past year. “Most of our clients are long-term holders,” he noted, explaining that many store their gold for over four years. He added, “Gold will fall at some point, but I believe given the economic environment, it's on an upward trend for at least five years.”
Analysts point out that while gold is valued as a hedge against volatility, its price can fluctuate. Wong explained that a rise in interest rates or easing geopolitical tensions could push prices down. For example, gold fell by about 6% in April when Trump backed off from dismissing Federal Reserve Chair Jerome Powell.
“Gold is often seen as a hedge against uncertainty, but the hedge can be unwound,” Wong said.
The metal’s volatility was also seen in 2022, when its value plunged from $2,000 to $1,600 (Sh262,000 to Sh209,600) an ounce after the US Federal Reserve increased rates to fight inflation caused by the Covid-19 pandemic. Heng warned that a sudden resurgence in inflation could pose a key risk to the current rally, as it might force the Fed to raise rates again.
Wong noted that the recent climb reflects market expectations that the Fed will start lowering interest rates, making gold more attractive to investors.
Meanwhile, Trump has escalated his criticism of the central bank, targeting Powell for not cutting rates fast enough and moving to fire Fed Governor Lisa Cook. Wong said the president’s attacks could “undermine confidence in the [Fed’s] ability to act as a credible, inflation-targeting central bank.”
“In such an environment, gold's role as a hedge against uncertainty gains renewed importance,” he added.