Gold prices rise amid geopolitical tensions and a partial US government shutdown
Gold prices rose on Wednesday, marking the second consecutive day of gains and recovering a significant portion of previous losses, amid escalating geopolitical tensions and continued economic uncertainty.
The precious metal approached our first technical target of $5,100 per ounce, as we anticipated in our weekly analysis (available here), supported by several factors that boosted demand for it as a safe haven.
Middle East tensions support gold
Geopolitical risks in the Middle East continued to play a key role in supporting gold prices, as the region remains a persistent source of tensions that increase the appeal of the precious metal for investors.
In the latest developments, US forces shot down an Iranian drone near an aircraft carrier in the Arabian Sea, and a US-flagged vessel escaped an attempted seizure by armed Iranian gunboats.
Despite these events, US President Donald Trump affirmed the continuation of diplomatic efforts, while the White House announced that US-Iranian talks were still scheduled for Friday.
Structural Factors Supporting Gold's Upward Trend
The fundamentals supporting gold's rise remain intact, most notably:
- Investors continuing to diversify their portfolios away from high-risk assets.
- Escalating global geopolitical risks.
- Rising levels of government debt.
- Uncertainty surrounding future US policy.
These factors combined bolster demand for gold as a safe haven and investment during times of turmoil.
Impact of Government Shutdown on Labor Market Data
Economically, the partial US government shutdown may delay the release of key labor market data, including the jobs report and the monthly non-farm payrolls report.
The absence of this data adds further uncertainty to the markets, which in turn supports demand for gold as a safe haven.
Banks' and Institutions' Gold Price Forecasts
Goldman Sachs announced that there are significant upside risks that could push gold above its previous forecast of $5,400 per ounce by the end of the year.
This is due to continued gold purchases by central banks and increased demand from retail investors for gold-backed exchange-traded funds (ETFs).
Indus Securities was even more optimistic, predicting that gold prices would reach $5,600 per ounce by April or, at the latest, by the end of the first half of the year, with the potential for further gains towards $6,000 per ounce by year-end.
Ultimately, gold remains supported by a combination of geopolitical risks, global monetary policies, and strong investment demand.
With US economic data delayed and international tensions escalating, the potential for further gains in the coming period remains.
