Gold prices surged past $4,000 per ounce for the first time on Wednesday as investors sought safety amid expectations of U.S. interest rate cuts and growing concerns over a possible U.S. government shutdown.
The precious metal’s rally also reflected investor anxiety that the tech-driven surge propelling equity markets to record highs may have gone too far, fueling fears of an asset bubble.
Gold has climbed more than 50 percent since the start of the year, supported by a combination of global economic uncertainty, Donald Trump’s trade policies, and geopolitical tensions.
Adding to the momentum this week was political turmoil in France, where the prime minister resigned and President Emmanuel Macron’s former premier urged him to step down and call early elections.
Gold - traditionally seen as a haven during uncertainty - hit a record $4,037.10 per ounce on Wednesday, even as the U.S. dollar strengthened against most major currencies. Silver also traded near its all-time high.
The ongoing U.S. government shutdown has deepened investor unease, delaying the release of key economic data - including jobs figures - and complicating the Federal Reserve’s decision-making on interest rates.
“The rapid rise in gold prices has been supported by rising inflows into exchange-traded funds and central bank buying, including solid demand from China, as gold benefits from political, economic, and inflation uncertainty.”- Taylor Nugent, National Australia Bank.
Chris Weston of Pepperstone added that “funds and global reserve managers want a hedge against fiscal recklessness, currency debasement, and unpredictable government policy - and gold sits squarely at the heart of that movement.”
While gold soared, Asian equity markets were more subdued as investors questioned the sustainability of the AI-driven rally that has seen some tech companies and indexes reach historic highs.
Chipmaker Nvidia recently surpassed a $4 trillion valuation, underscoring the sector’s meteoric rise. However, a report that Oracle’s cloud computing profit margins were weaker than expected rattled Wall Street, sending all three major indexes into the red.
“In a market priced for perfection, any delay in cash flow - even a temporary one - feels like the bartender calling ‘last call’,”- Stephen Innes, SPI Asset Management.
Asian tech stocks mirrored the decline, with Alibaba and JD.com slipping in Hong Kong, TSMC falling in Taipei, and Renesas dropping sharply in Tokyo.
Hong Kong and Taipei led regional losses, followed by Sydney, Mumbai, and Singapore, while Wellington, Manila, Bangkok, and Jakarta saw modest gains.
Tokyo’s market retreated after recent gains tied to optimism over the election of Sanae Takaichi, a business-friendly conservative expected to push for stimulus measures and monetary easing.
European markets - including London, Paris, and Frankfurt - also opened higher on Wednesday, buoyed by gold’s record-breaking surge.
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