Gold steadied as the dollar edged higher, cooling a record-breaking rally that’s been further fueled by the US government shutdown and the political crisis in France.
Bullion rose past $3,977 an ounce earlier on Tuesday, before paring gains as the greenback strengthened. A stronger dollar typically weighs on gold, making it more expensive for buyers in other currencies.
Gold’s rally gained new momentum after the suspension of federal operations in the US — now stretching into its second week — deprived investors of key data needed to gauge the health of the economy, while the Federal Reserve struggles to assess changing conditions. Traders are still pricing in a quarter-point cut this month, which should benefit gold as it doesn’t pay interest.
In France, the resignation of Sebastien Lecornu as prime minister has thwarted attempts to rein in the largest fiscal deficit in the euro area. Along with Sanae Takaichi’s near-certain elevation as the next Japanese prime minister, the political upheaval has bolstered the dollar against the euro and the yen, the second and third most-traded currencies.
The political shakeups in France and Japan are adding to fiscal concerns and contributing to the rally in gold, Nicky Shiels, head of research and metals strategy at MKS Pamp SA, said in a note. A mix of retail demand, especially in Europe and Japan, and institutional inflows has driven the latest surge, she said.
US President Donald Trump has set the scene for gold’s surge of around 50% this year, as his aggressive moves to reshape global trade and geopolitics spurred a flight to safety and a move away from the dollar. Central banks and gold-backed exchange-traded funds have been enthusiastic buyers, while the Fed’s interest-rate cut, and the prospect of more to come have added momentum to the rally.
Meanwhile, the People’s Bank of China extended its gold buying streak in September for an 11th consecutive month as bullion climbed to fresh records.
Reflecting the positive mood, Goldman Sachs Group Inc. — a long-standing bull on gold — raised its price forecast for December 2026 to $4,900 an ounce, up from $4,300, analysts said in a note, citing ETF inflows and central-bank buying.
“I’d suggest overweight in gold — despite its high price — as a hedge against the US dollar and preparing for more shocks to come,” said David Chao, a global market strategist at Invesco Asset Management. Allocation to gold as a percentage of investors’ portfolios is likely currently in the low single digits — but a level of around 5% is “a prudent measure to me,” he added.
Spot gold was little changed at $3,961.29 an ounce as of 11:31 a.m. in London, with prices on track for the biggest annual gain since 1979. The Bloomberg Dollar Spot Index rose 0.2%. Silver and platinum fell, while palladium rose.
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