Gold Prices Hit Record High Amid Safe Haven Demand

Gold prices reached a record high on Friday, fueled by safe haven demand ahead of the upcoming U.S. presidential election and an interest rate cut from the European Central Bank.

At 09:50 ET (13:50 GMT), Spot gold increased by 0.8% to $2,713.18 an ounce, while December gold futures also rose 0.8% to $2,728.30 an ounce, reaching unprecedented levels.

Gold Buoyed by Pre-Election Safe Haven Demand

Bullion prices broke out of a narrow trading range observed over the past two weeks, hitting new highs as the U.S. election approached. Recent polls indicated a close race between Vice President Kamala Harris and former President Donald Trump, intensifying uncertainty about the election results.

While media polls showed Harris with a slight edge, prediction and betting markets leaned towards a Trump victory, amplifying uncertainty over the outcome. Additionally, ongoing tensions in the Middle East contributed to safe haven demand for gold, with traders preparing for potential Israeli retaliation against Iran following an early-October attack.

Gold to Go Higher Still – UBS

Analysts at UBS anticipate that gold prices will increase over the next 6 to 12 months due to declining interest rates and strong central bank purchases of the metal. In a note to clients, UBS noted that demand for gold is expected to remain high as central banks aim to diversify their holdings amid various potential risks. They projected gold prices could reach $2,900 per ounce by September 2025, driven by an inverse relationship between interest rates and gold prices.

Gold Brushes Off Stronger Dollar

Despite the pressure of a stronger dollar, which hit a 2.5-month high this week, gold prices firmed. The dollar's increase was primarily due to stronger-than-expected retail sales data and a decline in weekly jobless claims, signaling strength in the labor market. This has led to speculation that the Federal Reserve will cut interest rates by a lesser margin in the near future.

However, a 25 basis point rate cut by the ECB indicates that major global central banks are still in easing mode, which is likely to favor gold and other non-yielding assets. ANZ analysts stated, “The precious metal found support from the ECB rate cut, reminding the market that most central banks have moved into easing mode. This helped it overcome economic data potentially slowing the Fed's rate cutting cycle,” highlighting that haven demand for gold remains strong.

(Ambar Warrick contributed to this article.)