Investors demand stability, which has led to current gold prices reaching new highs due to U.S. political and financial uncertainty. On Tuesday, spot gold increased to $3,848.65 per ounce, and U.S. gold futures contracts of the December contract went up to $3,877. Bullion is up 11.6% this month, putting it on track for its best performance since August 2011.
Fears of a potential shutdown of the U.S government drove up the safe-haven demand. The talks between President Donald Trump and Democratic congressional members did not yield much ground, and people feared a government service disruption might happen on Wednesday. The Labor Department also stated that it would suspend the release of economic data, including employment figures, in the event of a shutdown.
According to the FedWatch tool created by the CME Group, market players are now pricing in an 89% probability of a 25-basis-point interest rate reduction at the next Federal Reserve meeting. At low rates, the opportunity cost of holding gold decreases, which helps drive demand for gold in uncertain times.
The officials at the Federal Reserve, such as St. Louis Fed President Alberto Musalem, indicated that they were ready to cut the interest rate further. They, however, noted that they needed to strike a balance between easing the monetary policy and policies that protect against prolonged inflation. According to analysts, the interplay of political risk and changes in economic policies continues to provide favorable conditions for the precious metal.
A positive trend in investor sentiment was also an indication of increased interest in gold-backed financial products. On Monday, the SPDR Gold Trust, the largest global gold-backed exchange-traded fund, reported an increase in its holdings of 0.60% to 1,011.73 metric tons, the most significant level of its holdings since July 2022. This expansion highlights the importance of institutional and retail demand in sustaining momentum.
The broader precious metals markets had been performing differently. Spot Silver was traded at $46.93 per ounce, representing an 18.2% increase in September. Platinum fell 0.8% to $1,588.70, and palladium fell 0.7% to $1,258.60.
Analysts currently consider the $ 4,000 target as a potential end-of-year gold price, with claims that unrelenting geopolitical tensions and low borrowing costs are in their favour. It is centered on future labor and manufacturing data from the U.S., which may also provide additional clues to the Federal Reserve's policy and investor confidence.