MW Gold is holding above $4,000 for reasons that could drive it to $5,000

By Naeem Aslam

U.S. budget uncertainty and Fed rate-cut hopes fuel safe-haven demand

Gold's price is representative of a market that is tempering optimism with pragmatism.

Gold is trading firmly above $4,000 an ounce in the aftermath of the U.S. government shutdown. Most traders see gold's continuing strength as evidence that financial markets value safety amid volatility, political battles and a weak U.S. economic outlook.

In this scenario, the price strength of gold could be seen as a show of wisdom rather than a sign of exuberance, as market participants are hedging their investments by maintaining or adding to their positions in physical gold (GC00) amid growing optimism that a functional U.S. government will bring confidence to economic indicators.

Yet even as markets display optimism, caution should be exercised, as uncertainty stemming from structural concerns, including economic and monetary policy, could create turbulence. Indeed, the highs for gold in 2025 are likely already in - though $5,000 an ounce is a modest target for next year.

The big driver of gold prices continues to be fiscal- and monetary-policy leadership in the U.S. The prolonged government shutdown had resulted in a lack of critical economic information, leading to questions about the timing of the Fed's next rate decision. The reopening has begun, and this should quicken the pace for a potential December rate cut, which is now seen as essentially a 50-50 tossup according to the FedWatch tool provided by CME.

A lower interest rate is often associated with reduced real yields, making other assets such as gold relatively more alluring for investment. The soft macroeconomic environment continues to offer support, with the ADP indicator indicating that an average of 11,000 jobs are being shed each week by companies operating in the U.S., indicating a weak labor market - hence a dovish Fed policy posture.

As far as policies are concerned, recent developments in the Trump administration, including proposals regarding offshore oil drilling, shareholder voting rights and regulation reform, have further fueled perceptions of governance uncertainty, leading investors to hedge their risks by accumulating hard assets.

Globally, trends in dedollarization, robust central bank purchases and ETF investments continue to create structural demand. The surge in gold prices so far this year represents a combination of speculative investment, as well as institutional and national strategies to hedge against a diversification of currencies, as the constant pressure to accumulate the metal has established a floor price, sustaining the upward move.

Technically, gold is strongly holding an upward channel. The move above the resistance level of $4,050 confirmed a medium-term upward trajectory, with the next resistance level at $4,216 per ounce.

A breakthrough beyond this could open the door to a potential retest at the all-time high of $4,381 registered on Oct. 20. Support levels are seen around $3,882, with a stronger anchor at $3,789.

Read: Gold has a shot at $5,000 if investors rekindle this popular trade

Zaye Capital Markets

Gold-market momentum indicators are strongly positive, with moving averages lining up in a strong upward configuration, emphasizing consistent institutional interest. Investors believe that continued accumulation by central banks and strong interest from consumers could propel gold above $5,000 an ounce by late 2026.

Still, tactical caution should be exercised. While optimism over the reopened government and a potentially accommodative Fed supports gold sentiment, a reversal could occur if the data change unpredictably.

The next phase of the gold price move will depend on a "soft landing" for the U.S. economy, where the pace of growth slows but doesn't deteriorate significantly, allowing for lower interest rates and more liquid market conditions. Reacceleration of the economy or a tightening of fiscal conditions could limit any gains.

Gold's current price is representative of a market that is tempering optimism with pragmatism. While safe-haven sentiment has received a boost with the end of the U.S. shutdown and the market's increasingly confident expectations of a Fed rate cut, investors are approaching this market with a scalpel rather than a machete.

The unpredictability inherent to politics, mixed signals emitted by economic indicators and simmering geopolitical tensions make a structural long position in gold increasingly justifiable - particularly among investors looking to diversify portfolios exposed to both stocks and the U.S. dollar DXY. Zaye Capital Markets sees gold as both a hedge and a performing asset, with a floor price well above $4,100 an ounce.

Naeem Aslam is chief investment officer at Zaye Capital Markets in London.

More: Gold is sending investors clues about the economy and interest rates

Also read: Here's how the smart money is buying gold - now that it's likely peaked for the year

-Naeem Aslam

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November 14, 2025 07:26 ET (12:26 GMT)

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