Has Gold Peaked? Analysis of Driving Factors and Investor Risk Warnings
2025-10-10 16:17:12
Spot gold rebounded slightly during the Asian and European trading hours on Friday (October 10th), currently up 0.25% and trading near 3986, just below the 4000 mark. Due to the unexpected easing of tensions in the Middle East and the venting of trading sentiment surrounding the rapid rise in gold prices, spot gold plummeted by over 2% overnight. It's worth noting that a previous article suggested that the fastest gold price rises revealed a peak in sentiment, and coupled with the potential for a sharp correction at the psychologically significant 4000 mark, spot gold plunged by over 2% the following day during the New York trading session.
Gold prices have risen by about 50% so far this year; on Monday, Goldman Sachs raised its gold price forecast for December 2026 from $4,300 an ounce to $4,900; since the same period last year, gold prices have risen by closer to 50%, even though the riskier stock market has repeatedly set record highs.
Bob Trist, an economist and professor of economics at Northeastern University, noted that some of gold's properties are classic and provide a key explanation for its rising price. "Gold is traditionally a safe-haven asset," Trist said. "Its core connection to the macroeconomy is that rising gold prices inherently reflect heightened economic uncertainty." In times of uncertainty, the precious metal remains attractive to investors, whether trading on Wall Street or purchasing at the retail level. The multiple factors driving economic uncertainty are precisely what are driving gold prices higher.
In terms of specific drivers, trade policy and geopolitical risks are the primary drivers. At the trade policy level, uncertainty surrounds tariff levels and their pass-through effects. This, combined with geopolitical risks, has contributed to increased volatility and uncertainty in exchange rates. "This has significantly increased the appeal of gold compared to sovereign currency-denominated assets such as short-term government bonds," he said.
At the same time, such uncertainty also amplifies the uncertainty of inflation in the United States. Trist added, "The uncertainty of US inflation stems from the unknown impact of tariffs and the political pressure on the Federal Reserve to cut interest rates. This factor is likely to play a role in pushing up gold prices."
In addition, factors exacerbating market anxiety include a weak U.S. labor market, rising inflation, the government shutdown, which is now in its second week, and growing fiscal budget pressures on governments around the world ; President Donald Trump's attacks on the Federal Reserve have further undermined some investors' confidence in the safety of U.S. Treasury bonds.
Notably, Trist also pointed out that gold prices had already begun their upward trend before the 2024 US election, "so it's unclear how much the recent rise in policy-related uncertainty will impact gold prices." Regardless of the core drivers, individual investors and global central banks are seeking safe havens for their funds, and gold is becoming a consensus choice.
From the perspective of market participants, individual investors are an important force driving up gold prices and are also the main carriers of market trading sentiment. When they are in high spirits, they will push trading products to overvalue, and when they are in low spirits, it may cause gold to overshoot.
According to data from fund manager State Street, one of the most popular gold investment tools currently, the gold exchange-traded fund (ETF) with the trading code "GLD", has attracted more than US$35 billion in investor funds this year, breaking the historical record. The previous record was US$29 billion in 2020.
The core reason why gold ETFs are popular among individual investors is that investors can invest at a price lower than that of a single gold bar: each share of the GLD ETF represents a partial interest in a trust plan that stores physical gold in high-security vaults operated by JPMorgan and HSBC in London and New York.
The gold rush isn't limited to the exchange market; retail sales are also strong. Costco executives said in a September 25 earnings call that gold bar sales significantly supported the company's e-commerce sales. The mass merchandiser reported double-digit growth in gold sales in the three months ended August 31.
Furthermore, the weakening US dollar exchange rate has also been a significant factor driving gold's record-breaking gains. As trade and political uncertainty continue to simmer, the US dollar index, which measures the greenback against major currencies like the British pound, euro, and yen, has fallen by approximately 9% this year. A weaker dollar reduces the cost of gold for holders of non-US currencies, further driving up gold prices.
Investors should be aware of the inherent risks of gold—as many market pundits have noted, it's considered a "non-interest-bearing" investment. In a 2011 letter to investors, Berkshire Hathaway's legendary CEO, Warren Buffett, warned of gold's "two significant drawbacks": "Gold has certain industrial and decorative uses, but demand for these uses is limited and cannot absorb any additional gold production;"
Furthermore, even if you hold an ounce of gold forever, at the end of the day, you still only have an ounce of gold.” Unlike interest in a savings account, income from certificates of deposit, stock dividends, or other investment vehicles, gold doesn’t generate any cash flow return until it is sold.
Despite this, Buffett also objectively pointed out: "A century later, when people fall into panic again, there will surely be a large number of investors flocking to gold." ING analysts also emphasized on Thursday: "US$4,000 per ounce is a historic breakthrough for gold.
Gold prices have long reflected global economic and political pressures, typically rising during periods of heightened uncertainty. They noted that during the 2007-2008 global financial crisis, gold prices surpassed $1,000 per ounce; during the COVID-19 pandemic, they climbed to $2,000 per ounce; and earlier this year, as Trump implemented his aggressive global tariff policy, gold prices surpassed $3,000 per ounce and have continued to rise since then.
Gold prices have risen by about 50% so far this year; on Monday, Goldman Sachs raised its gold price forecast for December 2026 from $4,300 an ounce to $4,900; since the same period last year, gold prices have risen by closer to 50%, even though the riskier stock market has repeatedly set record highs.
Economic, political and geopolitical uncertainties continue to stimulate gold's safe-haven properties
Bob Trist, an economist and professor of economics at Northeastern University, noted that some of gold's properties are classic and provide a key explanation for its rising price. "Gold is traditionally a safe-haven asset," Trist said. "Its core connection to the macroeconomy is that rising gold prices inherently reflect heightened economic uncertainty." In times of uncertainty, the precious metal remains attractive to investors, whether trading on Wall Street or purchasing at the retail level. The multiple factors driving economic uncertainty are precisely what are driving gold prices higher.
In terms of specific drivers, trade policy and geopolitical risks are the primary drivers. At the trade policy level, uncertainty surrounds tariff levels and their pass-through effects. This, combined with geopolitical risks, has contributed to increased volatility and uncertainty in exchange rates. "This has significantly increased the appeal of gold compared to sovereign currency-denominated assets such as short-term government bonds," he said.
At the same time, such uncertainty also amplifies the uncertainty of inflation in the United States. Trist added, "The uncertainty of US inflation stems from the unknown impact of tariffs and the political pressure on the Federal Reserve to cut interest rates. This factor is likely to play a role in pushing up gold prices."
In addition, factors exacerbating market anxiety include a weak U.S. labor market, rising inflation, the government shutdown, which is now in its second week, and growing fiscal budget pressures on governments around the world ; President Donald Trump's attacks on the Federal Reserve have further undermined some investors' confidence in the safety of U.S. Treasury bonds.
Notably, Trist also pointed out that gold prices had already begun their upward trend before the 2024 US election, "so it's unclear how much the recent rise in policy-related uncertainty will impact gold prices." Regardless of the core drivers, individual investors and global central banks are seeking safe havens for their funds, and gold is becoming a consensus choice.
The rise of individual investors has pushed up gold prices
From the perspective of market participants, individual investors are an important force driving up gold prices and are also the main carriers of market trading sentiment. When they are in high spirits, they will push trading products to overvalue, and when they are in low spirits, it may cause gold to overshoot.
According to data from fund manager State Street, one of the most popular gold investment tools currently, the gold exchange-traded fund (ETF) with the trading code "GLD", has attracted more than US$35 billion in investor funds this year, breaking the historical record. The previous record was US$29 billion in 2020.
The core reason why gold ETFs are popular among individual investors is that investors can invest at a price lower than that of a single gold bar: each share of the GLD ETF represents a partial interest in a trust plan that stores physical gold in high-security vaults operated by JPMorgan and HSBC in London and New York.
The gold rush isn't limited to the exchange market; retail sales are also strong. Costco executives said in a September 25 earnings call that gold bar sales significantly supported the company's e-commerce sales. The mass merchandiser reported double-digit growth in gold sales in the three months ended August 31.
The weakening of the US dollar exchange rate reduces the cost of purchasing gold, which is a key auxiliary factor
Furthermore, the weakening US dollar exchange rate has also been a significant factor driving gold's record-breaking gains. As trade and political uncertainty continue to simmer, the US dollar index, which measures the greenback against major currencies like the British pound, euro, and yen, has fallen by approximately 9% this year. A weaker dollar reduces the cost of gold for holders of non-US currencies, further driving up gold prices.
Investor Risk Warning: Gold's "Non-Interest-Bearing" Attribute and Authoritative Reminder
Investors should be aware of the inherent risks of gold—as many market pundits have noted, it's considered a "non-interest-bearing" investment. In a 2011 letter to investors, Berkshire Hathaway's legendary CEO, Warren Buffett, warned of gold's "two significant drawbacks": "Gold has certain industrial and decorative uses, but demand for these uses is limited and cannot absorb any additional gold production;"
Furthermore, even if you hold an ounce of gold forever, at the end of the day, you still only have an ounce of gold.” Unlike interest in a savings account, income from certificates of deposit, stock dividends, or other investment vehicles, gold doesn’t generate any cash flow return until it is sold.
Despite this, Buffett also objectively pointed out: "A century later, when people fall into panic again, there will surely be a large number of investors flocking to gold." ING analysts also emphasized on Thursday: "US$4,000 per ounce is a historic breakthrough for gold.
Gold prices have long reflected global economic and political pressures, typically rising during periods of heightened uncertainty. They noted that during the 2007-2008 global financial crisis, gold prices surpassed $1,000 per ounce; during the COVID-19 pandemic, they climbed to $2,000 per ounce; and earlier this year, as Trump implemented his aggressive global tariff policy, gold prices surpassed $3,000 per ounce and have continued to rise since then.
- 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.
