Economic signals behind gold breaking through the $4,500 mark as hedging sentiment heats up

From the perspective of the semi-monthly market observation, the gold market has been continuously climbing recently, reaching a historic high of over $4,500. This is not solely due to technical breakthroughs but is the result of multiple economic factors acting together.

Weakening US Economic Data Sparks Safe-Haven Buying

The recently released US inflation data underperformed expectations, and the accompanying employment report also appeared quite subdued. These shifts in economic signals have directly increased market concerns about risk assets, leading to a surge of safe-haven capital flowing into the gold market. Investors generally tend to shift funds into traditional safe-haven assets when uncertainty increases.

Rate Cut Expectations Drive Gold Price Rise

The market widely anticipates that the Federal Reserve (FED) will implement at least two 25 basis point rate cuts next year. This expectation has directly changed the cost structure of capital—lower interest rate environments significantly reduce the opportunity cost of holding gold. Since gold itself does not generate income, its attractiveness is often inversely related to real interest rates.

Revaluation of Non-Yielding Assets

Under the expectation of falling interest rates, assets considered “non-yielding,” such as gold, will be re-evaluated in terms of relative value. When deposit or bond yields decline, investors’ demand for traditional safe-haven assets like gold increases, further supporting gold prices.