Gold is glittering for investors, with prices now topping a record $4,000 an ounce. But the reasons behind the shiny metal’s surge may be less than dazzling, with Wall Street analysts saying it reflects growing unease over the U.S. economy and political stability.
The price of gold has leaped 53% this year alone, far outpacing the 15% gain in the S&P 500 stock index over the same period. The price of an ounce of gold edged higher on Wednesday, touching $4,078, according to financial data company FactSet, with some analysts predicting it to go higher.
Investors have long turned to gold during periods of economic turmoil and high inflation, viewing it as both a safe haven when markets turn volatile and a hedge against rising prices.
Of late, however, stock prices have steamed to record highs this year, economic growth has accelerated in recent months and inflation this year has remained relatively subdued, prompting questions about what’s fueling investors’ renewed appetite for gold.
“$4,000 an ounce seemed far-fetched at the start of the year as gold entered 2025 near $2,800 an ounce. But after a ~50% rally, here we are,” eToro U.S. investment analyst Bret Kenwell said in an email.
The reasons for the surge boil down to several economic and political factors, according to Kenwell and other investment analysts.
Economic uncertainty
Gold is often a refuge for investors when they’re worried about the economy, and the ongoing U.S. government shutdown is only fueling their anxieties, according to Nigel Green, CEO of investment firm deVere Group.
“The situation in Washington has reminded investors that political promises do not equate to financial security. Gold represents protection from that uncertainty, but its price now also reflects how much faith has drained from other assets. That level of dependence always carries risk,” Green said in an email.
Although the economy continues to expand, investors are also expressing concern about potential headwinds to growth, including the impact of U.S. tariffs and a weakening job market, according to economists.
Federal agencies currently aren’t releasing economic data due to the government shutdown, now in its second week. That makes it more difficult to get a handle on the state of the economy, said Kevin Ford, FX and macro strategist at Convera.
“[T]he US economy remains a challenge to read due to the ongoing government shutdown, which has severely diminished visibility,” Ford noted. “However, the shutdown is a material headwind: S&P Global Ratings estimates it could trim GDP growth by 0.1−0.2 percentage point for every week the government remains closed.”
Fed rate cuts
In September, the Federal Reserve lowered its benchmark interest rate for the first time since late 2024 and signaled that two more cuts could be in the cards later this year.
Gold has risen partly due to investor expectations that the Fed is entering a cycle of easing its monetary policy, according to Bart Melek, head of commodity strategy at TD Securities.
With interest rates seemingly heading lower, gold is more attractive as a financial asset because investors aren’t losing out on higher yields from Treasuries and other government bonds, he told investors in a report. And with inflation drifting up due to the impact of the Trump administration’s tariffs, gold can also continue to offer an inflation hedge.
Gold “may be a better safe-haven than Treasuries,” Melek wrote. “Add to that the fact that ore grades are dropping, the increased use of these factors of production suggests that gold would be better at protecting purchasing power.”
Global gold demand
Investments in gold have also been driven by other factors. Analysts point to strong gold demand from central banks around the world amid heightened geopolitical tensions, such as the ongoing wars in Gaza and Ukraine.
“The gold rally started in 2022,” Giovanni Staunovo, commodity analyst at UBS Global Wealth Management, said via email on Tuesday. The “trigger point” for the increase was when the U.S. and other Western allies moved to freeze around $300 billion of Russian foreign holdings at the beginning of the war in Ukraine, he added.
Central banks in other nations are “the quiet force behind this climb,” deVere’s Green said. “They are buying close to one thousand [tons] of gold each year to reduce exposure to the dollar and to reinforce their financial resilience. When official institutions keep accumulating at this rate, they create a strong foundation beneath the market, but even that has limits.”
Where could gold go from here?
Some investment pros think gold has more room to run, pointing to ongoing economic challenges such as the slowing U.S. job market and rising inflation, as well as the Fed likely continuing to push down borrowing costs.
“We think the rally is not yet done — we expect prices to rise to $4,200/oz over the coming months — and keep our ‘attractive’ rating on gold in our global strategy,” Ulrike Hoffmann-Burchardi, CIO Americas and global head of equities at UBS Global Wealth Management, told investors in an email.
Goldman Sachs is forecasting that gold could hit $4,900 an ounce by December 2026, Reuters reported.
Still, experts urge average investors not to put all their eggs in one basket. Critics say gold isn’t always the inflation hedge many claim and that there are more efficient ways to protect against potential loss of capital, such as derivative-based investments.
“Gold is perceived by many market participants as a safe-haven asset. But investors need to be aware it has a volatility of 10-15%,” Staunovo noted. He added that smaller amounts of physical gold, such as gold coins or 1-gram bars, have larger ranges between buying and selling prices.
contributed to this report.
