Gold breaks $4,000 on rate-cut bets, haven demand

Spot gold peaked at around $4,037 per oz. in early trading Wednesday as investors sought safety amid a dovish United States Federal Reserve outlook and a U.S. data vacuum from a government shutdown now in its second week.

The yellow metal is up more than 50% year-to-date and set its 40^th record on a softer U.S. dollar, persistent geopolitical risks and steady central-bank buying. Traders are pricing in two quarter-point cuts later this month and in December, pushing real-yield expectations lower and lifting bullion’s appeal. Political turmoil in France and a leadership change in Japan added to global uncertainty. A Fed cut last month also helped drive the largest monthly inflow to gold-backed exchange-traded funds (ETFs) in more than three years in September.

“Gold hitting $4,000 marks a pivotal moment,” the World Gold Council senior markets strategist Joe Cavatoni said in a statement to The Northern Miner. “It confirms we are operating in a new investment landscape, one defined by permanent market uncertainty and unaddressed structural challenges.”

The council sees gold’s role in portfolios evolving from a temporary haven to a strategic allocation.

Markets will watch how the U.S. data backlog shapes Fed communication later this month and into December, whether September’s ETF inflows continued into this month and monthly reserve disclosures from major buyers such as China and India. Political outcomes in France and early policy signals from Japan’s new prime minister could also sway risk appetite.

Miners’ boon

Gold’s run has been propelled by a “confluence” of short-term drivers – mainly the prospect of negative real rates next year – and longer-term fears over monetary debasement, BMO Capital Markets research analyst Helen Amos said Wednesday in a note.

A 53.6% year-to-date gain, she noted, places the yellow metal on track for the strongest annual performance since 1979 if maintained. Amos also pointed to signs of de-dollarization, citing a report that some traders offering Russian oil to Indian state refiners have requested payment in Chinese renminbi.

The powerful bid in Asian trading “indicates very substantial financial forces are at work,” London-based analyst John Meyer at SP Angel said, adding that coordinated – or coincidental – central-bank purchases alongside roughly 100,000 oz. of exchange-traded fund buying may have amplified the current price move. Even if bullion were to retrace $300–$400 per oz., miners’ margins would likely remain “extraordinarily elevated.”

Large producers remain leveraged to spot prices. Barrick Mining (TSX: ABX; NYSE: B) and Newmont (TSX: NGT; NYSE: NEM) are not hedged, leaving earnings fully exposed to bullion’s upside, according to analysts.