Gold more expensive than 4000 dollars - analysts raise forecasts

Frankfurt. The price of gold has broken a historic mark: on Wednesday, an ounce of gold cost more than USD 4000 for the first time. The new record high is now around 4039 US dollars per ounce.

And the rally could continue, according to many investors and asset managers. Influential investor Ray Dalio, for example, commented on this at a conference on Tuesday. Gold is undoubtedly a safe haven compared to the US dollar, he emphasised. This is because the precious metal is a reliable store of value at a time of growing national debt and dwindling confidence in the stability of national currencies.

Analysts are raising their forecasts one after the other. The experts at major US bank Goldman Sachs see the price of gold reaching USD 4900 per ounce by the end of 2026. Analysts at UBS have also revised their forecasts upwards and expect gold to rise to USD 4,200 per ounce in the coming months.

But what are the long-term factors that have pushed gold above the 4000 mark - and will they continue to support the rally?

The price of gold has doubled in less than two years.He is heading for the best annual result since the 1970s. At that time, the financial system came apart at the seams after US President Richard Nixon cancelled the dollar's gold peg in 1971.

Until then, the Bretton Woods system stipulated that all currencies were pegged to the dollar at a fixed rate. The USA, in turn, made a commitment to the other countries to exchange dollars for gold. The price fixed for this was 35 dollars per troy ounce.

However, US government spending increased in the 1970s, partly due to the Vietnam War. Nixon eventually cancelled the dollar's gold peg in order to be able to take on more debt, but this caused inflation to skyrocket.

However, despite the inflation risks, Nixon subsequently urged the Federal Reserve (Fed) to keep interest rates low. Because the then Fed Chairman Arthur Burns was unable to withstand this pressure and gave in, inflation reached double-digit levels. Market observers, such as Dalio, are currently reminded of this situation.

Alexander Zumpfe, a trader at precious metals specialist Heraeus, also sees opportunities for a continuation of the rally towards USD 4200 if monetary easing in the US proceeds quickly. "The combination of the ongoing government shutdown in the US, weaker economic data and the growing expectation of significant interest rate cuts by the Federal Reserve has weighed on confidence in traditional asset classes," he writes. Investors are increasingly turning to gold.

This is shown by the inflows into gold-backed ETFs, which are primarily used by institutional investors to participate in the price trends of the precious metal. According to the industry association World Gold Council (WGC), around 146 tonnes flowed into gold ETFs in September alone. This was the strongest month ever.

Large North American investors in particular invested in the precious metal via ETFs. Speculative investors have also significantly increased their long positions on the futures market by 33 tonnes. There are several factors behind this - both short-term and long-term.

US debt drives investors to gold

The fact that the Republican-led US government was unable to reach an agreement with the Democrats on the release of financial resources and government operations are now at a standstill is one of the short-term drivers of the gold price. However, the US shutdown is merely a further escalation stage in a long-running crisis that is driving investors to gold: the high level of debt in the world's largest economy.

This is because investor confidence in the US's ability to get its financial situation under control is declining. US bonds are becoming less attractive, gold investments more interesting.

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A correlation that has long held true has therefore softened since the end of 2023, when gold broke a record high for the first time since August 2020: the gold price rose despite high bond yields.

Previously, gold, which does not generate any current income, benefited from a low interest rate environment, as it then became more attractive compared to other investments considered safe, such as bonds.

In the past, analysts therefore explained gold price rises primarily with the prospect of interest rate cuts by the US Federal Reserve. However, this would now be too short-sighted, especially as the market is increasingly concerned about the Fed's independence. This is because Trump has been putting pressure on Fed Chairman Jerome Powell for months. The president favours low interest rates, which make it easier for him to take on debt.

Institutional investors see this as a warning signal: the US dollar may no longer be the safe haven it once was.

If there are signs that a government is interfering in the central bank's monetary policy, confidence in the currency falls. There are plenty of examples of this, such as the fall in the value of the Turkish lira - or the double-digit US inflation in the 1970s.

But even if confidence in the US currency should rise again, gold has also set records in other currencies. Gold is not a pure dollar story at the moment, says Adrian Ash, chief analyst at London-based gold trader Bullionvault. "Trump's return to the White House may have triggered the recent price surge, but his policies merely emphasise how important it remains for investors and savers to hedge against inflation - he did not cause the surge."

Asian buyers

Trump's policies are also driving demand for gold in another respect: his import tariffs are unsettling institutional investors. In the first quarter of the year alone, when he took office as US president, gold ETF holdings rose by the most in three years.

And inflows also increased in the second quarterprimarily in Chinese gold ETFs, as figures from the industry association World Gold Council (WGC) show.

For example, inflows into gold-backed ETFs listed in Asia amounted to 70 tonnes - almost as high as inflows into North American gold ETFs for the first time. This is an impressive figure, as Asian funds are much smaller overall. Their total holdings are less than a fifth of the volume of North American ETFs.

Most of the inflows into Asian gold ETFs took place in April, when Trump announced far-reaching tariffs. As a result, Chinese private investors became concerned about the impact on their economy. They bought 44 per cent more bars and coins than in the same period last year.

Chinese investors are now holding back somewhat, and Western asset managers are once again driving the rally. As Asian investors do not always buy gold for the same reasons as Western investors, the gold price should remain well supported even in phases of weak demand from the US and Europe.

Central bank purchases

The third reason why the price of gold is breaking records and continuing to rise is also linked to distrust in the US dollar: Central banks have been buying around 1000 tonnes of gold every year since 2022 andtwice as much as in the previous ten years.

This was triggered by the US sanctions against Russian currency reserves after Russia attacked Ukraine in violation of international law. These sanctions failed to have the desired effect, as Russia had hoarded large gold reserves, which it continues to freely dispose of. Other countries, such as China, had learnt from this and also began to increase their gold purchases.

This also had an impact on the gold price. Previously, central bank purchases had more of a floor-building effect. In other words, they helped to prevent the gold price from sliding endlessly into the basement in the event of a sell-off on the gold market. Now, however, they have a significant influence on the gold price.

Central banks also increased their global gold reserves by a total of 15 tonnes in August, shortly before the start of the latest record hunt, according to WGC data. The largest buyer this time was Kazakhstan with eight tonnes, but China also continued its purchases.

Goldman Sachs analysts see central bank purchases as one of the most important reasons why the price of gold is likely to continue to rise. They estimate that this trend will continue for another three years. Compared to the industrialised countries, some of which hold around 70 per cent of their reserves in gold, emerging market central banks are more likely to buy gold.still underweighted in gold.

Some European countries are also apparently planning to buy more. The National Bank of Poland, for example, which bought the most gold in 2024, has increased its target share of gold from 20 to 30 per cent.