Gaza ceasefire, Fed rate cut "fight", should we buy or sell gold now?
2025-10-09 16:51:55
During the Asia-Europe session on Wednesday, spot gold hit a bottom and rebounded. Affected by the ceasefire agreement signed by Hamas in Gaza, it fell nearly 1% during the session, and then rebounded sharply. It is currently down 0.07%, and its price is stable above the historical high of US$4,000 per ounce.
Gold prices have surged 53% this year alone, far outpacing the 15% gain in the S&P 500. Spot gold prices accelerated their upward trend on Wednesday, hitting $4,078 an ounce, with some analysts predicting further price increases.
Gold prices hit a record high on October 7, exceeding $4,000 per ounce. Analysts say investors are turning to gold assets amid concerns about the U.S. economy and political stability.
For a long time, investors have always regarded gold as an important choice in periods of economic turmoil and high inflation. They believe that gold is a safe-haven asset when the market fluctuates, and a tool to hedge against inflation when prices rise.
However, the market has recently shown contradictory trends: the stock market has climbed to record highs this year, economic growth has accelerated in recent months, and inflation has been relatively mild this year, with no significant increase in 10- and 30-year Treasury yields. This series of phenomena raises the question: what factors are driving investors' renewed interest in gold?
The surge in gold prices can be attributed to a number of economic and political factors.
Nigel Green, CEO of investment firm DeVere Group, pointed out that when investors are worried about the economic outlook, gold often becomes a "safe haven", and the current ongoing shutdown of the US government has further exacerbated this anxiety.
“The situation in Washington is sending a clear signal to investors: political commitment does not equal financial security,” Green said in an email. “Gold is a safeguard against this uncertainty, but the current price of gold also reflects a significant loss of confidence in other assets. This reliance on a single asset always carries risks.”
Economists say that while the U.S. economy remains in an expansionary phase, investors have expressed concerns about potential headwinds to growth, including the impact of U.S. tariffs and a weak job market.
Currently, due to the US government shutdown, which is now in its second week, federal agencies have not yet released economic data. Kevin Ford, foreign exchange and macro strategist at Comvita, said this makes it difficult for the market to accurately judge the true state of the current economy.
Ford noted, "The ongoing U.S. government shutdown has significantly reduced the transparency of economic data, making it significantly more difficult to assess the current state of the U.S. economy. However, the shutdown itself is a substantial negative: S&P Global Ratings estimates that each week of the shutdown could reduce GDP growth by 0.1-0.2 percentage points."
Christopher Wong, an interest rate strategist at OCBC Bank in Singapore, said the US government shutdown, triggered by repeated deadlocks on public spending issues, was the core driving force behind the rise in gold prices.
Historically, investors have turned to safe-haven assets like gold during previous US government shutdowns. For example, during the month-long shutdown during Trump's first term, gold prices rose nearly 4%. However, Huang Zhiguang warns that if the shutdown ends sooner than some investors expect, gold prices may face downward pressure.
In September, the Federal Reserve cut its benchmark interest rate for the first time since late 2024 and signaled that it could implement two more rate cuts later this year.
Bart Melek, head of commodity strategy at TD Securities, said the rise in gold prices was partly due to investors' expectations that the Federal Reserve has entered a cycle of monetary policy easing.
In a report for investors, he stated that with the clear downward trend in interest rates, gold's appeal as a financial asset is gradually increasing, as holding gold no longer means missing out on the higher returns offered by U.S. Treasuries and other government bonds. Furthermore, as inflation is gradually rising due to the Trump administration's tariff policies, gold can still serve as a hedge against inflation.
OCBC Bank's Huang Zhiguang pointed out that if interest rate hikes are implemented, geopolitical tensions ease, or political uncertainty subsides, gold prices may come under downward pressure. He cited the example of a month-on-month drop of about 6% in April this year after Trump abandoned the idea of firing Federal Reserve Chairman Jerome Powell.
Melek wrote: "Gold may become a better safe-haven asset than U.S. Treasuries. In addition, the grade of gold ore continues to decline, and the cost of mining will rise rapidly as the ore grade decreases. However, the actual application demand of gold in the scenario of purchasing power protection is increasing, which means that gold will have a better performance in terms of value preservation."
Other factors are also driving the gold investment boom. Analysts point out that amid escalating geopolitical tensions, such as the ongoing fighting in Gaza and Ukraine, global central bank demand for gold remains strong.
"Gold's rally started in 2022," Giovanni Stonovo, commodities analyst at UBS Global Wealth Management, said in an email on Tuesday. He added that the "trigger point" for the rally was the move by the United States and other Western allies to freeze about $300 billion in Russian overseas assets in the early stages of the Russia-Ukraine conflict.
Green of the DeVere Group said that central banks are the "invisible driving force behind the current rise in gold prices." "They are buying nearly 1,000 tons of gold each year to reduce their dependence on the US dollar and enhance their financial resilience. When official institutions continue to increase their holdings at this scale, it will provide solid support for the gold market, but this support is not unlimited."
Meanwhile, geopolitical tensions could limit demand for gold if they ease, with Hamas agreeing to a ceasefire in Gaza on Thursday.
According to Cairo News Channel and other media outlets, citing Hamas sources, Israel and Hamas will sign a ceasefire agreement in Gaza on the 9th in Egypt. Separately, the Palestinian newspaper Al-Quds reported on the 9th that Hamas and various Palestinian factions have agreed to a ceasefire plan in Gaza, with the formal agreement to be signed in Egypt on the 9th.
The agreement includes the immediate opening of five border crossings to allow humanitarian aid into Gaza, adjustments to the Israeli military's Gaza withdrawal roadmap, and the release of 20 surviving Israeli detainees in the first phase. Reports indicate that the agreement is guaranteed by the United States, Egypt, Qatar, and Turkey, and that as long as both sides adhere to the agreement, conflict will not recur. Neither Israel nor Hamas has yet commented on the matter.
Some professional investors believe that gold still has room to rise. They point out that ongoing economic challenges such as the slowdown in the US job market and rising inflation, as well as the expectation that the Federal Reserve is likely to continue to lower borrowing costs, will provide support for gold prices.
"We believe the gold rally is not over yet – we expect prices to rise to $4,200 an ounce in the coming months and maintain our bullish rating on gold in our global investment strategy," Ulrike Hoffmann-Burcadi, chief investment officer for the Americas and global head of equities at UBS Global Wealth Management, said in an email to investors.
Goldman Sachs predicts that the price of gold may reach $4,900 per ounce by December 2026.
However, experts still advise ordinary investors to avoid putting all their eggs in one basket. Critics believe that gold is not always an effective inflation hedge as most people claim, and that there are more efficient ways to hedge capital in the market, such as derivative investment products.
“Many market participants view gold as a safe-haven asset, but investors need to be aware that gold has a volatility of 10% to 15%,” Stonovo said, adding that the bid-ask spread for small physical gold items, such as coins or 1-gram bars, is even wider.
At the same time, as written in the previous article, gold has experienced several consecutive days of rapid growth near 4,000 points, reaching a high point in sentiment. When trading enthusiasm cools down, coupled with the 4,000-point psychological integer mark and the profit-taking mentality, as well as the easing of the Gaza war, gold may start to pull back. However, due to the recent strong performance of gold (for example, on October 7, when the U.S. stock market fell sharply due to the influence of the AI narrative and the short essay, gold followed the decline and then recovered and rose again within the same day), the short-term correction of gold may be strongly supported.
Gold prices have surged 53% this year alone, far outpacing the 15% gain in the S&P 500. Spot gold prices accelerated their upward trend on Wednesday, hitting $4,078 an ounce, with some analysts predicting further price increases.
Gold prices hit a record high on October 7, exceeding $4,000 per ounce. Analysts say investors are turning to gold assets amid concerns about the U.S. economy and political stability.
For a long time, investors have always regarded gold as an important choice in periods of economic turmoil and high inflation. They believe that gold is a safe-haven asset when the market fluctuates, and a tool to hedge against inflation when prices rise.
However, the market has recently shown contradictory trends: the stock market has climbed to record highs this year, economic growth has accelerated in recent months, and inflation has been relatively mild this year, with no significant increase in 10- and 30-year Treasury yields. This series of phenomena raises the question: what factors are driving investors' renewed interest in gold?
The surge in gold prices can be attributed to a number of economic and political factors.
Economic uncertainty
Nigel Green, CEO of investment firm DeVere Group, pointed out that when investors are worried about the economic outlook, gold often becomes a "safe haven", and the current ongoing shutdown of the US government has further exacerbated this anxiety.
“The situation in Washington is sending a clear signal to investors: political commitment does not equal financial security,” Green said in an email. “Gold is a safeguard against this uncertainty, but the current price of gold also reflects a significant loss of confidence in other assets. This reliance on a single asset always carries risks.”
Economists say that while the U.S. economy remains in an expansionary phase, investors have expressed concerns about potential headwinds to growth, including the impact of U.S. tariffs and a weak job market.
Currently, due to the US government shutdown, which is now in its second week, federal agencies have not yet released economic data. Kevin Ford, foreign exchange and macro strategist at Comvita, said this makes it difficult for the market to accurately judge the true state of the current economy.
Ford noted, "The ongoing U.S. government shutdown has significantly reduced the transparency of economic data, making it significantly more difficult to assess the current state of the U.S. economy. However, the shutdown itself is a substantial negative: S&P Global Ratings estimates that each week of the shutdown could reduce GDP growth by 0.1-0.2 percentage points."
Christopher Wong, an interest rate strategist at OCBC Bank in Singapore, said the US government shutdown, triggered by repeated deadlocks on public spending issues, was the core driving force behind the rise in gold prices.
Historically, investors have turned to safe-haven assets like gold during previous US government shutdowns. For example, during the month-long shutdown during Trump's first term, gold prices rose nearly 4%. However, Huang Zhiguang warns that if the shutdown ends sooner than some investors expect, gold prices may face downward pressure.
Fed rate cuts support gold prices
In September, the Federal Reserve cut its benchmark interest rate for the first time since late 2024 and signaled that it could implement two more rate cuts later this year.
Bart Melek, head of commodity strategy at TD Securities, said the rise in gold prices was partly due to investors' expectations that the Federal Reserve has entered a cycle of monetary policy easing.
In a report for investors, he stated that with the clear downward trend in interest rates, gold's appeal as a financial asset is gradually increasing, as holding gold no longer means missing out on the higher returns offered by U.S. Treasuries and other government bonds. Furthermore, as inflation is gradually rising due to the Trump administration's tariff policies, gold can still serve as a hedge against inflation.
OCBC Bank's Huang Zhiguang pointed out that if interest rate hikes are implemented, geopolitical tensions ease, or political uncertainty subsides, gold prices may come under downward pressure. He cited the example of a month-on-month drop of about 6% in April this year after Trump abandoned the idea of firing Federal Reserve Chairman Jerome Powell.
Mining becomes more difficult and the grade of gold ore decreases
Melek wrote: "Gold may become a better safe-haven asset than U.S. Treasuries. In addition, the grade of gold ore continues to decline, and the cost of mining will rise rapidly as the ore grade decreases. However, the actual application demand of gold in the scenario of purchasing power protection is increasing, which means that gold will have a better performance in terms of value preservation."
Strong global demand for gold
Other factors are also driving the gold investment boom. Analysts point out that amid escalating geopolitical tensions, such as the ongoing fighting in Gaza and Ukraine, global central bank demand for gold remains strong.
"Gold's rally started in 2022," Giovanni Stonovo, commodities analyst at UBS Global Wealth Management, said in an email on Tuesday. He added that the "trigger point" for the rally was the move by the United States and other Western allies to freeze about $300 billion in Russian overseas assets in the early stages of the Russia-Ukraine conflict.
Green of the DeVere Group said that central banks are the "invisible driving force behind the current rise in gold prices." "They are buying nearly 1,000 tons of gold each year to reduce their dependence on the US dollar and enhance their financial resilience. When official institutions continue to increase their holdings at this scale, it will provide solid support for the gold market, but this support is not unlimited."
Meanwhile, geopolitical tensions could limit demand for gold if they ease, with Hamas agreeing to a ceasefire in Gaza on Thursday.
According to Cairo News Channel and other media outlets, citing Hamas sources, Israel and Hamas will sign a ceasefire agreement in Gaza on the 9th in Egypt. Separately, the Palestinian newspaper Al-Quds reported on the 9th that Hamas and various Palestinian factions have agreed to a ceasefire plan in Gaza, with the formal agreement to be signed in Egypt on the 9th.
The agreement includes the immediate opening of five border crossings to allow humanitarian aid into Gaza, adjustments to the Israeli military's Gaza withdrawal roadmap, and the release of 20 surviving Israeli detainees in the first phase. Reports indicate that the agreement is guaranteed by the United States, Egypt, Qatar, and Turkey, and that as long as both sides adhere to the agreement, conflict will not recur. Neither Israel nor Hamas has yet commented on the matter.
Outlook for future gold trends
Some professional investors believe that gold still has room to rise. They point out that ongoing economic challenges such as the slowdown in the US job market and rising inflation, as well as the expectation that the Federal Reserve is likely to continue to lower borrowing costs, will provide support for gold prices.
"We believe the gold rally is not over yet – we expect prices to rise to $4,200 an ounce in the coming months and maintain our bullish rating on gold in our global investment strategy," Ulrike Hoffmann-Burcadi, chief investment officer for the Americas and global head of equities at UBS Global Wealth Management, said in an email to investors.
Goldman Sachs predicts that the price of gold may reach $4,900 per ounce by December 2026.
However, experts still advise ordinary investors to avoid putting all their eggs in one basket. Critics believe that gold is not always an effective inflation hedge as most people claim, and that there are more efficient ways to hedge capital in the market, such as derivative investment products.
“Many market participants view gold as a safe-haven asset, but investors need to be aware that gold has a volatility of 10% to 15%,” Stonovo said, adding that the bid-ask spread for small physical gold items, such as coins or 1-gram bars, is even wider.
At the same time, as written in the previous article, gold has experienced several consecutive days of rapid growth near 4,000 points, reaching a high point in sentiment. When trading enthusiasm cools down, coupled with the 4,000-point psychological integer mark and the profit-taking mentality, as well as the easing of the Gaza war, gold may start to pull back. However, due to the recent strong performance of gold (for example, on October 7, when the U.S. stock market fell sharply due to the influence of the AI narrative and the short essay, gold followed the decline and then recovered and rose again within the same day), the short-term correction of gold may be strongly supported.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
