Spot gold prices climbed above $4,000 an ounce for the first time on Wednesday, extending a blistering rally fueled by economic uncertainty, political turmoil in Washington, and growing anxiety over the independence of the US Federal Reserve.
Bullion rose as much as 0.4% to $4,001.11 an ounce, marking a symbolic milestone for the precious metal that traded below $2,000 just two years ago.
Gold’s performance has now far outpaced equities this century, rising more than 50% so far in 2025 alone.
Safe-haven demand accelerates
The surge reflects intensifying investor demand for safe-haven assets amid concerns about a prolonged US government shutdown and deepening political divisions.
Gold’s advance has also been supported by the start of the Fed’s monetary easing cycle, which reduces the opportunity cost of holding a non-interest-bearing asset.
Exchange-traded funds backed by bullion saw their largest monthly inflow in more than three years in September as investors sought protection from potential market shocks.
“We expect gold to reach a cyclical peak when there is greatest market concern about the outlook for Fed independence,” analysts at Macquarie Bank Ltd. wrote in a note dated Sept. 30.
Historical context: Gold rises with global stress
Gold’s trajectory has historically mirrored periods of financial and political turbulence.
The metal first breached $1,000 an ounce in the aftermath of the 2008 financial crisis, crossed $2,000 during the Covid pandemic, and reached $3,000 in 2022 amid the trade tensions driven by President Donald Trump’s tariff policies.
Now, gold’s climb past $4,000 comes against the backdrop of what analysts describe as one of the most direct assaults on the Fed’s autonomy in decades.
President Trump’s public threats toward Chair Jerome Powell and efforts to oust Governor Lisa Cook have intensified market speculation that the central bank may become politically pliant.
A politically weakened Fed could deliver lower interest rates and potentially stoke inflation—conditions often described as “Goldilocks” for gold prices. The metal tends to perform best when inflation expectations are high and borrowing costs remain subdued.
Macquarie analysts added that if a compromised Fed were to make “clear policy errors,” gold’s performance could strengthen even further.
The rally is on track to deliver gold’s best annual return since the 1970s, a period when surging inflation and the collapse of the gold standard drove a 15-fold increase in its value.
Central banks continue to drive demand
Central banks have played an increasingly prominent role in supporting gold prices.
Once net sellers, they became consistent buyers following the global financial crisis, with the pace of accumulation doubling after 2022, when Western sanctions froze Russia’s foreign-exchange reserves.
That event prompted several nations to diversify reserves away from the US dollar, as concerns grew that Washington might treat foreign creditors less favourably in times of crisis.
“Elevated central bank buying is a structural shift in reserve management behavior, and we do not expect a near-term reversal,” said Lina Thomas, commodities strategist at Goldman Sachs Group Inc., in a September note.
“Our base case assumes that the current trend in official sector accumulation continues for another three years,” she added.
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