By: Economy Middle east

Gold prices has vaulted beyond the $4,000 per ounce mark for the first time in history, continuing an extraordinary rally fueled by growing economic uncertainty, geopolitical tensions, and expectations of further monetary easing by the U.S. Federal Reserve. This milestone reflects a surge of more than 50 percent in gold prices so far in 2025, establishing gold as one of the best-performing asset classes in the global financial markets this year.

In Dubai, gold rates saw a significant increase on Wednesday. The price of 24-carat gold rose by AED3.50, reaching AED483.00. Meanwhile, 22-carat gold climbed AED3.25 to AED447.25. Additionally, 21-carat gold gained AED3.00, bringing it to AED428.75, while 18-carat gold also edged up AED3.00 to AED367.75.

Globally, spot gold rose by 0.96 percent to $4,018.72, following last week’s new all-time high of $3,896.49. Meanwhile, U.S. gold futures for December delivery increased by 0.98 percent to $4,043.02.

Shutdown fuels safe haven demand

The rally has been driven by investors seeking a safe haven amid mounting concerns about the U.S. economy and a tense geopolitical landscape. The ongoing U.S. government shutdown, which began in early October 2025, has delayed critical economic data releases, contributing to uncertainty that typically benefits gold as a store of value. This uncertainty is compounded by delays and deadlock between Congress’ two chambers, heightening demand for the yellow metal as a form of financial stability.

Adding to the demand is the Federal Reserve’s pivot toward easing monetary policy after a lengthy period of interest rate hikes aimed at curbing inflation. The Fed’s decision to lower interest rates in September marked the first rate cut in 2023. Markets have since priced in expectations for additional rate reductions, with two more cuts anticipated by the end of the year. Lower interest rates decrease the opportunity cost of holding gold, which yields no interest but is considered a robust hedge against inflation and currency depreciation.

Historic surge since October 2023

On Tuesday, October 7, 2025, gold futures briefly peaked at an intraday high above $4,014 per ounce, closing around $4,000. This represents an incredible price surge since October 2023 when gold was trading near $1,800 an ounce. The nearly 120 percent increase over two years underscores the scale and velocity of this historic rally. Traders and investors have increasingly favored gold due to a weaker U.S. dollar, which has declined about 10 percent this year, and rising inflationary pressures that central banks worldwide are struggling to contain. 

Institutional investors and central banks are notable contributors to gold’s soaring prices. Central banks, especially in emerging markets, are increasing their gold holdings to diversify reserves and reduce reliance on the U.S. dollar amid shifting global economic power dynamics. For instance, China has moved part of its reserves from U.S. Treasuries into gold in response to geopolitical tensions and sanctions regimes. Meanwhile, private investors and funds are injecting significant inflows into gold-backed exchange-traded funds (ETFs), further boosting demand and pushing prices higher.

Ray Dalio, founder of Bridgewater Associates, highlighted the strategic role of gold in investment portfolios during a forum in Connecticut. He recommended that investors allocate approximately 15 percent of their portfolios to gold, emphasizing that debt securities no longer serve as effective stores of wealth in the current economic environment. Dalio underlined gold’s unique ability to perform well when traditional asset classes decline, making it a critical component of wealth preservation.

Potential for price consolidation or correction

However, not all market participants are unanimously bullish. Bank of America warned of potential “uptrend exhaustion” in gold prices, cautioning that a consolidation or correction could occur in the near term as prices approach new highs. This advice urges investors to remain vigilant and prepared for possible volatility despite the strong upward momentum.

From a technical perspective, gold has faced resistance near the $4,000 mark but continues to challenge this psychological barrier as bullish momentum sustains the rally. Charts indicate possible short-term consolidation or retracement, but the prevailing trend remains firmly upward. Support levels around $3,867 per ounce provide a cushion for investors seeking entry points in volatile markets.

Gold’s ascent is also reinforced by macroeconomic and geopolitical catalysts beyond U.S. borders. Currency market volatility, such as the weakening of the Japanese yen following recent political shifts, has fueled instability that supports safe-haven gold demand. Leadership changes and political uncertainty in major economies like France add to investor caution. Moreover, trade tensions and tariff fears under ongoing global disputes have heightened concerns about economic growth, further elevating gold’s appeal as an inflation hedge. 

Looking ahead, Goldman Sachs recently raised its gold price forecast for December 2026 from $4,300 to $4,900 per ounce, citing continued strong demand from central banks and growing diversification by the private sector. The bank expects central bank gold purchases to remain robust, averaging 80 tons in 2025 and 70 tons in 2026, with emerging-market central banks leading increases in gold reserves.