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Video: Three reasons why we’re still bullish on gold (3 min)

Thought of the day

Risk appetite improved ahead of the market open on Monday as the US moved one step closer to reopening the government. A group of moderate Senate Democrats on Sunday evening broke with their party leaders and voted to advance a bill that would fund the government until 30 January. S&P 500 futures rose 0.7%.

Yet gold, traditionally viewed as a haven asset, also advanced, rising 2% to around USD 4,080/oz at the time of writing. We think gold prices can climb further, even if the potential end to the longest government shutdown in US history supports risk sentiment. In our view, bullion’s recent pullback is just a pause in its ongoing bull run.

Political uncertainty should continue to support gold. Senate Republicans struck a deal with enough Democrats on Sunday to advance the House-passed continuing resolution, which will be amended to fund the government until the end of January. The deal also includes full-year funding for the Departments of Agriculture, Veterans Affairs, and Congress itself, as well as the reversal of layoffs during the shutdown period. However, it’s not yet clear how quickly the shutdown can end. A vote for final Senate passage has yet to be scheduled, and the House also needs to approve the measure before it goes to US President Donald Trump’s desk for his signature. Partial shutdown remains a possibility after 30 January if Congress does not pass another continuing resolution or make progress on funding for other federal departments. Additionally, uncertainty around the Supreme Court’s ruling over the legality of tariffs based on the International Emergency Economic Powers Act (IEEPA) should provide ongoing support for gold.

Elevated global government debt boosts demand for gold. Rising government debt around the world has increased investor concerns about fiscal sustainability and the potential for inflation or currency depreciation. As gold is often viewed as a store of value that protects against these risks, demand for bullion continues to climb steadily. The latest data from the World Gold Council show that total gold demand in the September quarter reached a record high, driven by strong investment interest and recovering central bank purchases. We expect global gold demand this year to reach the strongest level since 2011.

The Federal Reserve’s easing path and US dollar weakness are also supportive of the precious metal. While Fed Chair Jerome Powell recently said the central bank’s policy is not on a pre-set path, we continue to believe that weakening demand for workers should keep the Fed on track to cut interest rates twice more by early 2026. Data compiled by the University of Michigan last Friday showed that US consumer sentiment tumbled to near the lowest on record, as they expect to be personally affected by a weakening labor market. Separate data from the Federal Reserve Bank of New York also showed a third straight month of rising unemployment expectations. With US real interest rates likely to fall further and undermine the appeal of the US dollar, we expect gold to stay supported.

So, we remain bullish on gold, viewing it as an effective portfolio diversifier and hedge. We maintain our price target of USD 4,200/oz over the next 12 months, while any significant rise in political and financial market risks could push gold toward our upside target of USD 4,700/oz.