Gold posts a new record
Gold prices have once more climbed to record heights — this time exceeding the $4,000 mark for the first time ever. Gold futures closed Tuesday at $4,004.40 an ounce, having risen to a day-high of $4,014.60. The valuable commodity has gained about 50% year to date, fuelled by global uncertainty, inflation fears, and a weakening U.S. dollar.
The rally occurs as investors increasingly worry about the economy and turn to gold—a long-standing “safe haven” asset—to protect their money. The U.S. dollar index is down 10% this year, as economic instability and political uncertainty continue to shake markets.
To the mix, President Donald Trump’s recent moves on international trade and the autonomy of the Federal Reserve have created an air of uncertainty over the market. All this has rendered gold a desirable substitute for investors seeking stability.
Central banks and investors are stockpiling gold
It’s not just run-of-the-mill investors who are putting money into gold. Central banks worldwide are also piling up higher levels of gold in their reserves — and faster than before. China and India started diversifying out of U.S. Treasuries and building up gold reserves after Washington slapped harsh sanctions on Russia in 2022.
These penalties led many nations to reassess how much they rely on the U.S. economy. Now, instead of depending so strongly on the dollar, countries are turning towards gold as a more stable form of wealth.
Individual investors, however, are buying gold in coins, bars, and exchange-traded funds (ETFs).o With inflation still high and living expenses on the rise, gold appears to be one of the few remaining safe havens available.
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The Fed’s rate reductions fuel the fire
The Federal Reserve decision to reduce interest rates in September was a major contributor to driving gold prices even higher. As interest rates fall, assets like Treasury bills become less attractive since they earn less.
The market is expecting the Fed to lower rates two more times by the end of the year, lowering the federal funds rate from where it currently is at 4.00% to 4.25%. The next meeting of the Federal Reserve board is October 29, and everyone will be watching closely.
Lowering rates has the effect of weakening the dollar and making gold more attractive, especially because gold does not earn interest but gains when the dollar loses value.
What the experts are saying
Some of the world’s top investors are urging individuals to purchase gold. Ray Dalio, the creator of Bridgewater Associates, advised individuals on Tuesday that they should hold “something like 15% of your portfolio in gold.”
Dalio also said debt securities are no longer a haven for money since inflation eats into returns. “Gold is the one asset that does really well when the typical pieces of your portfolio fall off,” he told the Greenwich Economic Forum in Connecticut.
But not everyone is bear-hugging. Bank of America warned this week that gold may be experiencing what it called “uptrend exhaustion”. The bank said that although gold’s gain has been impressive, the market could face a slowdown or correction in the second half of the year as prices top out around the $4,000 level.
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What it means for you
For everyday Americans, the gold rally is a reminder of how fragile the global economy can be. If you’re worried about inflation, falling stock prices, or the value of your savings, holding some gold — physically or through investment funds — could offer protection.
But the experts caution against excess. Gold is to be used as a long-term hedge and not as a get-rich-quick scheme. Even as prices keep on climbing or moderating, one can be sure that investors are betting on gold’s timeless capacity to hold its value when everything else appears uncertain.
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