Gold will continue its meteoric rise following the Federal Reserve’s interest rate decision, a top analysts has said, as economic and geopolitical conditions keep investors opting for the safe haven asset.
The precious metal hit $3,759 (£2,782.36) on Tuesday morning, as the asset surged after a slight wobble following the US central bank’s decision to cut interest rates by 0.25 per cent last week.
The decision was hailed “good news” for the gold market, as investors flocked to the asset in droves, due to lower interest rates generally driving investors into the precious metal.
Philip Newman, director of Metals Focus, noted both market figures and investors are “bullish” on gold’s rally over the next financial year following the Fed decision, as the central bank faces increasing pressure from Trump to adopt swift deeper cuts.
The sharp divisions among Fed officials and the prospect of a new Chair being appointed in 2026, also creates scope for faster cuts in the coming year than initially projected.
Gold is also expected to benefit from the recent strong run of global equities, as it encourages investors to diversify their portfolio with the precious metal in order to offset the risks of investing in the stock market.
Geopolitical tensions
Ongoing geopolitical tensions, have also caused investors to be lured in by gold, with Jamie Tunnicliffe chief executive of Bullion By Post, noting the ‘backdrop of significant unrest’ has ‘pushed the price to record levels’.
Meanwhile, European economic uncertainty has also caused a shift towards gold, including in France where Macron is facing increasing uncertainty over a proposed austerity budget, leading to concern over public finances and domestic policy.
Analysts also believed the proposed cryptocurrency restrictions in countries including France and Italy, could also steer investors back towards gold as the volatile asset class becomes less welcome.
London outlook
Elsewhere, the London market is bracing for the Autumn Budget’s impact on the precious metal, with analysts predicting it to cause a significant movement to the asset’s price.
Growing rumours regarding tax rises, could potentially spook investors away from traditional assets towards gold, in particular, Brittania and Sovereign coins which are not subjected to capital gains tax.
Tunnicliffe, said: “We’re currently in the midst of a perfect storm.
“The UK economy is facing… high inflation and an impending Autumn Budget. Whilst you can’t guarantee it, it’s hard to see the price going in any other direction at the moment.”