Gold is closing in on the $ 4,000-per-ounce mark, hitting fresh record highs in what has become its strongest year since 1979.
The spot price of gold has risen more than 1% today to $3,944 per ounce, edging closer to the symbolic $4,000 level. Since the start of January, gold prices have surged by around 50%, putting the metal on course for its biggest annual gain since the Iranian Revolution.
Both gold and silver are up more than 1%, with gold breaking through the $3,900 resistance level for the first time. The surge comes amid heightened global uncertainty, prompting investors to move towards safe-haven assets.
The precious metal has been buoyed by the ongoing US federal shutdown, triggered by disputes over government spending, which halted the release of key economic data, including Friday’s employment figures. The lack of clarity over the world’s largest economy has reinforced gold’s appeal as a safe-haven asset.
Gold has climbed more than 50% since the start of the year to above $3,900 per ounce — its best performance since 1979. Private investors have also poured into gold-backed exchange-traded funds, with Priyanka Sachdeva of Phillip Nova describing the pace of buying as “nothing short of remarkable.” Central banks now hold around 15% of their foreign exchange reserves in gold, the highest level in three decades.
The rally intensified this morning as bullion approached the $4,000 per ounce mark, driven by growing concerns about rising government debt levels in major economies. French bond yields have surged to their steepest levels since 2008 following the unexpected resignation of Prime Minister Sebastien Lecornu, while Japan’s long-term borrowing costs hit record highs after Sanae Takaichi was elected as leader of the ruling party, paving the way to become the country’s first female prime minister.
The yen slumped 2% to more than 150 per dollar and 1.6% against the pound to 201 as markets reacted to expectations that Ms. Takaichi will pursue aggressive fiscal stimulus. Her proposed policies lifted Japan’s Nikkei index nearly 5% to a record high.
Deutsche Bank’s Jim Reid commented that Ms. Takaichi “champions aggressive fiscal stimulus” which would support a “high-pressure economy,” but warned that Japan is already struggling with labour shortages, high inflation, and a weak yen — all of which raise concerns about the sustainability of further debt-fuelled growth.
Globally, long-term borrowing costs remain elevated, with the UK’s 30-year bond yields hovering near their highest level since 1998. Chris Weston, head of research at Pepperstone Group, said the inability of governments to rein in spending has given investors “another reason to buy gold.”
