Gold surged above $4,000 an ounce for the first time on Wednesday (October 8th) as investors flocked to the safe haven asset's historic rally to protect themselves from global economic and geopolitical uncertainty, while also betting on a US interest rate cut.

Spot gold rose 1.3% to $4,034.59 an ounce at 09:31 GMT. US gold futures for December delivery rose 1.3% to $4,056.80. Silver also followed gold's rally, rising 2.2% to $48.85 an ounce, just above its all-time high of $49.51.

The rally was driven by a combination of factors, including expectations of interest rate cuts, continued political and economic uncertainty, solid central bank buying, inflows into gold exchange-traded funds (ETFs), and a weakening dollar. "The underlying factors are much the same as before, in terms of geopolitical uncertainty, with the added spice of a government shutdown," said StoneX analyst Rhona O'Connell.

"The latter hasn't hampered equity gains, but there will still be some risk mitigation through gold bullion." The ongoing US government shutdown, which entered its eighth day on Wednesday, has delayed the release of key economic data, forcing investors to rely on non-governmental sources to assess the timing and scope of the Fed's interest rate cut.

The market is pricing in a 25 basis point rate cut at the upcoming Fed meeting, with a similar cut expected in December. Global crises, including the Middle East conflict and the war in Ukraine, have also contributed to increased demand for gold bullion, with political turmoil in France and Japan further fueling the hunt for safe-haven assets. The re-accumulation of developed market exchange-traded funds (ETFs) for the first time in five years is also a factor driving the rally, said Michael Hsueh, precious metals analyst at Deutsche Bank.

Physically backed gold ETFs in India recorded their largest monthly inflows in September, pushing assets under management to a record $10 billion. Analysts expect strong inflows into gold-backed ETFs, central bank purchases, and lower US interest rates to also support gold prices in 2026, prompting Goldman Sachs and UBS to raise their price forecasts.

"We expect gold to reach the $4,000 level by year-end, but the trajectory remains consistent with our broader outlook," said Nitesh Shah, commodity strategist at WisdomTree, reiterating their forecast that prices will reach $4,530 per ounce by the end of the third quarter of 2026.

"Fear of missing out" is also driving the rally, analysts said.

"One headwind for gold is the Fed's more hawkish stance on gold, but for now, Trump wants to see lower US interest rates, and that will continue to boost gold's appeal," said UBS analyst Giovanni Staunovo. This momentum also spread to other precious metals, with platinum rising 1.5% to $1,643.13, while palladium rose 3.9% to $1,390.03. (alg)

Source: Reuters