Global markets are on edge as investors weigh the twin forces of monetary policy and geopolitical risk.
On Wednesday, global shares rose on hopes of lower US interest rates, while gold surged past $4,000 per ounce for the first time amid a prolonged government shutdown in Washington, reported Bloomberg.
Gold, up 50% this year, has become the ultimate hedge against uncertainty. Weak dollars, political instability, and expectations of Federal Reserve rate cuts have fuelled the rally, attracting central banks, fund managers, and retail investors alike.
Domestically, gold hit a record Rs 1,22,220 per 10 grams, with February 2026 contracts at Rs 1,23,469. Silver also surged, with December delivery at Rs 1,48,179 per kilogram and March 2026 contracts touching Rs 1,50,000.
"Funds and global reserve managers want a hedge against fiscal recklessness, currency debasement, and unpredictable government policy, and gold sits squarely at the heart of that movement," said Chris Weston, head of research at Pepperstone.
Thierry Wizman, global FX & rates strategist at Macquarie Group, said the rally reflects a collective "hedge" against the possible collapse of Wall Street's AI-driven tech boom. "A collapse of that optimistic 'vision' might trigger an inflationary resolution for the world's sovereign debt overhang, rather than a productivity-based resolution."
European stocks gained 0.4 per cent, led by banks and energy, but auto shares lagged. BMW fell 7% after revising its 2025 earnings forecast downward. US stock futures hinted at modest gains in New York.
In France, caretaker Prime Minister Sebastien Lecornu suggested a budget deal could emerge by year-end, reducing the risk of snap elections. French bonds rallied slightly, but the euro hit one-month lows at $1.1628.
"It's another prime minister and it has been pretty volatile," said Nina Stanojevic, senior investment specialist at St. James’s Place. "It raises two areas of uncertainty - first around fiscal packages being pushed through and whether we get another snap election on the horizon, which would affect French OATs."
In Japan, political change has hammered the yen, which dropped to eight-month lows. Prime minister-in-waiting Sanae Takaichi’s stance on low rates and higher spending is raising fears of limited Bank of Japan intervention. The yen is down over 3 per cent this week.
"Hirofumi Suzuki, chief currency strategist at SMBC, said should the yen head towards near 160 within one to two weeks, 'FX intervention by the Japanese government would be viewed as more likely'."
The New Zealand dollar plunged nearly 1 per cent after the central bank cut rates by 50 basis points, signaling concern over economic fragility. The US dollar index hit its highest since August, despite the shutdown now in its eighth day.
Oil prices rose, with Brent crude at $65.97 a barrel and WTI at $62.28, shrugging off concerns over supply.
Gold’s rally has become historic. Spot gold rose 1.4 per cent to $4,039.10, while December US futures jumped 1.4 per cent to $4,061.80, reported Reuters.
Silver followed, up 2 per cent to $48.76. Spot gold has gained 54 per cent this year, leaving equities, bitcoin, crude, and the dollar in the dust.
"Background factors are much the same as before, in terms of geopolitical uncertainty, with the added spice of the government shutdown," Reuters quoted Rhona O’Connell, analyst at StoneX. "The latter is not impeding strong equities but nonetheless there will be a degree of risk mitigation via bullion."
The shutdown has stalled key economic data, forcing investors to rely on alternative sources to gauge Fed rate cuts, with markets pricing in a 25-basis-point cut in October and another in December.
Geopolitical tensions, including the Middle East conflict and the war in Ukraine, have added pressure on markets, while political turmoil in France and Japan has intensified the rush to gold.
Michael Hsueh, precious metals analyst at Deutsche Bank, noted that renewed ETF accumulation in developed markets has contributed to the rally.
Internationally, Comex December gold futures climbed over 1% to $4,051.55, while silver rose nearly 2% to $48.61. Analysts attributed the rally to safe-haven demand, falling bond yields, and Fed rate-cut expectations.
"Gold surpassed USD 4,000 per ounce, reaching a fresh milestone as investors fled to safety amid global economic uncertainties and a dovish Federal Reserve (Fed) outlook," said Jigar Trivedi, Senior Research Analyst at Reliance Securities. "Despite this uncertainty, traders are pricing in 25 basis point rate cuts in October and December by the Fed."
Manav Modi, Analyst, Precious Metal Research at Motilal Oswal Financial Services, added that political developments in France and Japan are driving further demand for bullion.
A World Gold Council report showed record quarterly inflows into gold-backed ETFs for the three months ending September.
"Inflows into gold exchange traded funds (ETFs) hit USD 64 billion year-to-date globally, with a record USD 17.3 billion in September," the report said, noting a 23 per cent quarter-on-quarter rise led by North American funds, followed by Europe and Asia, reported PTI.
"Ongoing trade, policy, and geopolitical risks continue to persist with no clear signs of abatement," the WGC report said.