Back
Gold continues to surge, continually setting fresh record highs and refusing to lose momentum. What began as a defensive trade has evolved into a global repricing of value. This week the metal reached levels above $4,000/ounce, driven by a combination of structural demand, waning confidence in the dollar, and a shift in central-bank-reserve strategy. The rally has spilled across markets, buoying commodity-linked currencies and helping the rand strengthen to its firmest levels since September 2024.
Three pillars behind the rally
1. Monetary policy
Markets are positioned for a deeper United States (US) Federal Reserve (Fed) easing cycle following the 25-basis point cut on 17 September, which lowered the funds range to 4.00% to 4.25%. Real yields have slipped, reducing the opportunity cost of holding gold. Investors now view bullion as an active allocation against policy uncertainty and fiscal imbalances rather than as a passive hedge.
2. Central bank buying
Official-sector purchases remain robust, though below the extraordinary pace of 2023. According to the World Gold Council, net central bank additions reached 244 tonnes in the first quarter of 2025. Poland has led with 67 tonnes year-to-date, while the People’s Bank of China extended its accumulation streak to 11 consecutive months through September. The motivation goes beyond diversification – it signals a strategic retreat from dollar concentration and sanction exposure. Such sovereign buying provides a firm floor for speculative flows to build on.
3. Geopolitical recalibration
Trade frictions, tariff disputes, and regional conflicts have shifted perceptions of safety. Where investors once sought refuge in US Treasuries, they now question whether assets tied to US fiscal policy still qualify as risk-free. Gold’s neutrality has elevated it from crisis hedge to long-term reserve component.
Dollar diversification and market psychology
The rally is no longer purely defensive. A weaker dollar has amplified it. The US Dollar Index (DXY) fell roughly 11% in the first half of 2025, its steepest first-half decline in decades, before recovering partway. It remains about 3% t0 4% lower year-on-year. As capital rotates out of dollar assets, a portion inevitably lands in gold. The same dynamic lifts commodity currencies and equity markets. This is not the panic-driven “fear trade” of 2020 – it reflects a structural realignment toward a multipolar reserve system.
When central banks expand holdings, private investors interpret it as validation rather than speculation. Exchange traded fund inflows and futures positions have followed official demand, turning each dip into a buying opportunity. Momentum has become self-reinforcing; sustained until liquidity or policy narratives shift.
What comes next
Gold’s rally remains underpinned by strong fundamentals, but momentum could moderate if the macroeconomic backdrop shifts. Central bank demand continues to provide a steady base, while subdued real yields still support non-yielding assets. However, the pace of gains will likely hinge on how US monetary policy, fiscal conditions, and global risk sentiment evolve over the coming months.
Market moves
Bonds
Yields on US Treasuries are largely unchanged, with the 10-year yield holding near 4.14% as political deadlock in Washington keeps markets on edge. The federal shutdown, now stretching into its ninth day, has frozen the release of key economic indicators that normally guide monetary policy decisions. Fed meeting minutes indicated that policymakers agree that there is sufficient strain on the labour market, to warrant further policy easing, even as inflation concerns remain. Futures markets still expect a 25-basis point cut at the next meeting, though bets on a December follow-up move have dropped to around 80%. Investor appetite was muted at the latest 10-year auction as the US government standoff clouds the near-term outlook.
The United Kingdom’s (UK’s) Gilt yields are hovering around 4.73%, reflecting investor caution ahead of the November budget and mounting questions over UK fiscal sustainability. UK Chancellor of the Exchequer, Rachel Reeves, faces the challenge of keeping growth intact after hiking employer social contributions by £25 billion in her first budget. UK inflation is projected to edge back up to 4% by year-end – double the Bank of England’s (BoE’s) target – while markets push back expectations for another rate cut to April 2026. BoE Chief Economist, Huw Pill, called for a restrained policy stance focused on inflation, countering calls for closer coordination with fiscal authorities as borrowing costs rise.
German Bunds are steady at roughly 2.7%. Weaker trade numbers showed exports and imports both contracting, underscoring softness in Europe’s largest economy. Meanwhile, investors are keeping an eye on France’s political reshuffle and the extended US shutdown for broader market implications.
Equities
US stock futures were steady this morning, following a modest pullback during overnight trade, as investors reassessed the rally driven by artificial intelligence (AI), Fed rate expectations, and the extended US government shutdown. The Dow fell 0.52%, while the S&P 500 and Nasdaq each lost around 0.3%. The US government shutdown, now in its ninth day, continues to delay economic data releases that could guide Fed policy. Focus is turning to third-quarter earnings, with major banks such as JPMorgan and Citigroup reporting next week. Airline Delta Airlines, and beverage giant PepsiCo each gained over 4% after upbeat results signalled firm consumer demand.
In the UK, the FTSE 100 slipped 0.4% to 9,509, weighed down by major banks HSBC and Lloyds. HSBC dropped 5.4% after announcing plans to privatise its Hang Seng Bank unit and suspend share buybacks, while Lloyds fell 3.3% on fresh historic car loan compensation provisions. Airline group ICAG rose 3.2% on strong earnings, and miners benefitted from firmer copper prices.
European indices tracked lower, with the STOXX 50 and 600 each down about 0.4%. Luxury car manufacturer Ferrari plunged 15% after cutting EV targets, while retail brands LVMH, Hermès, and L’Oréal declined up to 2.6%. Global healthcare company Novo Nordisk eased 1.1% after announcing its $4.7 billion acquisition of Akero Therapeutics (clinical stage company).
Commodities
Brent crude steadied near $65/barrel, extending yesterday’s session weakness as geopolitical tensions in the Middle East showed signs of easing. Israel and Hamas have reached an initial ceasefire agreement – a pivotal step in US- and Qatari-brokered negotiations to end the two-year conflict. Despite softer risk premiums, crude remains on track for a weekly advance, bolstered by fresh US sanctions on more than 50 entities and individuals linked to Iran’s energy trade, including a major Chinese refinery and an Iranian export hub. Data from the Energy Information Agency showed US crude inventories rising for a second week but staying close to typical seasonal levels, while refined product and Cushing stocks declined. Earlier in the week, the expanded Organisation of the Petroleum Exporting Countries, OPEC+, announced a modest supply increase, undershooting market expectations for a more aggressive move.
Meanwhile, gold is trading around $3,980/ounce, heading for its eighth straight weekly gain after hitting record highs, and topping $4,050/ounce earlier in the week. Gold lost nearly 2% yesterday but remains 3% up for the week. Yesterday, persistent macro uncertainty and renewed bets on US rate cuts continued to underpin demand. New York Fed President John Williams signalled that additional policy easing remains possible, though inflation concerns may slow the pace. Minutes from the latest Federal Open Market Committee meeting reflected a similar tone – policymakers acknowledged growing risks to employment but stayed wary of entrenched price pressures. The ongoing US government shutdown, now entering its second week, further clouded sentiment, delaying key data releases and prompting a brief pullback in bullion as investors booked profits after the ceasefire news.
Currencies
The US dollar climbed further this morning, following stronger overnight trade with the DXY holding above 99.3 and set for its best weekly performance in a year, advancing nearly 2%. The rally was underpinned by broad weakness in the yen and euro, as investors responded to diverging political and policy signals across major economies. The yen tumbled roughly 4% this week after former Economic Security Minister and conservative Sanae Takaichi secured Japan’s leadership, fuelling expectations of continued fiscal expansion and accommodative policy. Meanwhile, the US government shutdown has stalled key data releases, leaving traders to lean heavily on monetary policy expectations. Markets continue to price in a 95% probability of a 25-basis point Fed rate cut this month, with the likelihood of another reduction in December easing to around 80%.
The euro is hovering around $1.16/€, its weakest level since late August, weighed down by French political instability and sluggish German trade data. French President Emmanuel Macron faces the challenge of naming his sixth prime minister in less than two years, though the risk of snap elections appears to have diminished. Weak export and import figures added to concerns over the eurozone’s fragile recovery.
The pound slipped to $1.33/£, a nine-week low, as markets grow cautious ahead of the UK’s November budget and potential fiscal tightening. Traders now only expect the next BoE rate cut in April 2026.
*Please note that all information is at the time of writing.
Key indicators:
GBP/USD: 1.3301
GBP/EUR: 1.1498
GBP/ZAR: 22.94
GOLD: $3,961.73
BRENT CRUDE: $64.90
Written by Citadel Advisory Partner and Citadel Global Director, Bianca Botes.
Sources: Bloomberg, Reuters, SARB quarter bulletin, SARS merchandise trade statistics, Trading Economics and TradingView.
Written by Citadel Advisory Partner and Citadel Global Director, Bianca Botes.
© Peregrine Wealth Ltd
This publication has been compiled for information purposes only and does not take into account the needs or circumstances of any person or constitute advice of any kind. It is not an offer to sell or an invitation to invest. The information and opinions in this publication have been recorded by Peregrine Wealth Ltd in good faith from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. Peregrine Wealth Ltd accepts no liability whatsoever for any direct, indirect or consequential loss arising from the use of this publication or its contents. Peregrine Wealth Ltd (registration number 39538) is licensed by the Guernsey Financial Services Commission.