Gold prices surged to record highs on Wednesday, defying a strong U.S. dollar, as investors sought safe-haven assets amid global economic uncertainty and looming U.S. elections. At the same time, global stocks edged lower, with investors hesitant to make significant moves ahead of the Federal Reserve’s next interest rate decision and the outcome of the presidential election.
Gold Defies Dollar Strength, Hits Record High
Despite the dollar’s rise, which typically puts downward pressure on commodities like gold, the precious metal rallied to a new all-time high of $2,757.99 per ounce. Safe-haven demand has been bolstered by investor worries surrounding the U.S. election and ongoing geopolitical tensions in the Middle East and Europe. So far, gold has surged 33% this year, reflecting its appeal as a hedge against economic uncertainty.
While gold briefly dipped 0.8% to $2,726.51 per ounce by mid-day, U.S. gold futures settled slightly lower, down 0.1% to $2,741.50 per ounce. The rally in gold prices comes despite a strengthening U.S. dollar, which saw the dollar index—measuring the greenback against major currencies like the euro and yen—rise by 0.37% to 104.48.
U.S. Election Uncertainty Fuels Market Volatility
With the U.S. presidential election just around the corner, investors remain on edge. Betting websites have shown a slight uptick in the chances of Donald Trump defeating Vice President Kamala Harris, though opinion polls still indicate a tight race. Trump’s policies, including tariffs and restrictions on undocumented immigration, are expected to have inflationary effects, raising concerns about how his administration might impact markets if he returns to power.
“Yields rising are implying a pro-growth administration is potentially coming into power, and there’s some fear about deficit-spending,” said Thomas Hayes, chairman at Great Hill Capital in New York.
Meanwhile, Wall Street’s major indexes all traded lower on Wednesday, driven by declines in consumer discretionary, healthcare, and technology stocks. The Dow Jones Industrial Average fell 0.52% to 42,700.16, the S&P 500 dropped 0.36% to 5,830.00, and the Nasdaq Composite lost 0.56% to 18,469.35. The MSCI All-World Index echoed this weakness, down 0.41% on the day, while Europe’s STOXX 600 index also slid by 0.06%.
Federal Reserve Rate Cut Expectations Shift
Adding to market jitters, investors are rethinking how aggressively the Federal Reserve might cut interest rates following recent U.S. economic data, which suggests the economy is still expanding and creating jobs. Markets are currently pricing in a 92% chance of a 25-basis-point cut at the Fed’s next meeting in November, with another 25-basis-point cut expected by the end of the year. Just a month ago, traders had been anticipating as much as a full percentage point cut by January.
The yield on benchmark U.S. 10-year notes reached three-month highs, rising 3.8 basis points to 4.244%. “The market is now weighing how much the Fed might actually cut, given the strength of the economy,” added Hayes.
Goldman’s Euro Outlook and Oil Price Declines
In currency markets, the dollar continued to strengthen against major currencies, rising 1.34% against the Japanese yen to 153.08, while the euro fell 0.2% to $1.0775, marking its lowest point since early August. Goldman Sachs predicted that a Trump presidency could lead to a 10% decline in the euro, driven by expectations of hefty tariffs and tax cuts.
Oil prices also faced pressure as Brent crude futures dropped 1.14% to $75.17 per barrel, while West Texas Intermediate (WTI) crude slipped 1.13% to $70.93 per barrel. Weaker demand forecasts and concerns over global economic growth continue to weigh on oil markets.
As global markets grapple with U.S. election uncertainty and shifting economic expectations, gold has emerged as a resilient safe-haven asset, surging to new record highs. While stocks and oil prices have faced headwinds, gold’s rise reflects broader concerns about inflation, geopolitical risks, and the potential impacts of the Federal Reserve’s monetary policy decisions in the coming months.