Welcome back to the second edition of Commodities Weekly with Capital and Conflict. This week, Luca Chandarana and Kishan Sharma take a closer look at recent developments in the gold market.

Safe-Haven Surge: Why Gold Prices Spiked to Record Highs This Week

This week, gold prices reached a record high of $ 3,857/oz. This 4.8% increase marked the largest weekly spike in three months and included a sharp rally, during which prices shot up on Thursday and Friday. One of the driving forces behind this spike was the US jobs report data, which indicated a slowdown in the overall US economy. Other geopolitical events may have also contributed to the surge in gold prices. This week’s uncertainty in the US Federal Reserve can also explain the steep rise in gold prices. This article will examine the impact of these events and their potential implications.

What did the jobs data show:

The eagerly anticipated jobs report showed that only 22,000 jobs (compared with an expected 75,000-80,000) were added in the US Labour market in August. Furthermore, unemployment has risen to 4.3%, the highest level in four years. This suggests a slowing economy, which has caused speculation of future interest rate cuts. The expectation of cuts is reflected in the drop in the 10-year bond yield, which has fallen to 4.10% (down approximately 0.12-0.20% from last week). It is now at its lowest level in over 5 months. The expectation of interest rate cuts, which will weaken the US dollar and thus reduce the opportunity cost of holding gold, has boosted gold's appeal. Gold ETFs have seen increases in inflows as investors use them to hedge against inflation and currency risk. It is largely due to the drastic underperformance of the US economy, which has led to the spikes this week.

Geopolitical concerns:

The surge in demand for gold can also be attributed to the heightened geopolitical tensions of this week. On September 3rd, China held a widely anticipated military display, which signalled its strength and bolstered alliances with Russia and North Korea. The parade could have influenced investors as it could be viewed as a statement of independence and power, and could add to or create trade conflicts. Tension between India and the US has also escalated. On September 5, India’s Finance Minister, Nirmala Sitharaman, reaffirmed India will keep importing Russian oil, even with US tariffs now at 50% (previously 25%). This weakened belief that tensions would subside as India would eventually comply with US demands. Other events have escalated tensions:

• Vietnam expanded its military presence in the Spratlys.

• China strongly criticised the maritime exercise/demonstration by Australia and its allies this week.

• The Russia-Ukraine conflict escalated with the first bombing of a Ukrainian government building in Kyiv.

War and instability make gold more preferable as it retains its intrinsic value. Gold is insulated from these tensions as it does not rely on any one government, currency risks, government promises, or company solvency issues, all of which are increasingly volatile during times of conflict (gold is perceived as a safe-haven asset). The tensions in the South China Sea appear to be rapidly increasing as a result of heightened military action by many players (including the US’s involvement in the demonstration). Supply Chains and markets can be destabilised due to shipping lane disruptions, retaliatory economic sanctions, and tariffs, which have all boosted gold’s appeal in the past.

The news this week that China has achieved 10 consecutive months of growth in its gold reserves has reinforced the general trend of central banks increasing their gold supplies drastically over the last few years, signaling China’s unwavering attempt to reduce its reliance on US dollar reserves. This has directly increased demand over time, but this week’s report may signal to investors a sustained confidence in gold as a hedge and could indicate an upcoming geopolitical concern. Investors may be mimicking central banks as their advanced forecasting capabilities and inside knowledge might indicate future shocks.

Future:

As of the 7th of September, the current RSI - which indicates the speed and momentum at which gold is bought - is at approximately 79, which is up from 60 on Friday. This has surpassed the 70 mark commonly cited as the threshold for when gold has been overbought (i.e., too much has been bought too quickly). Thus, a slight drawback or stagnation, as the market corrects itself, could be expected in the short term. However, economic and political uncertainty could persist or worsen in the medium to long term. Thus, the price of gold may maintain its steep upward trajectory despite a large RSI reading.

The key question is: how long will this momentum last? Speculative momentum may result in a self-reinforcing cycle; investors buy now in preparation for future price hikes, which in turn contribute to further price increases. Price increases could persist as long as market uncertainty persists. One such concern is the current state of the Federal Reserve. Trump’s criticism of the Fed Chair Jerome Powell on September 5th has amplified pressures to cut interest rates faster and by more. This (along with anticipation towards Trump's impending appointment of a new Federal Reserve Governor) could potentially explain and further accelerate the rush to invest in gold due to concerns about the politicization of the Federal Reserve. One model, released by Goldman Sachs and JP Morgan on September 4th, even predicted Gold prices soaring to nearly $5,000/oz by mid-2026 — if investors lose faith in the independence of the Federal Reserve. This figure is based on a scenario whereby concerned investors move “just 1% of the privately owned treasury market were to flow to gold.” (Daan Struyven)

Thus, rising global tensions, the slowing economy, reports on central bank activity, and uncertainty regarding the Federal Reserve have all contributed to the sharp spike in gold prices this week—the sharpest in three months. The implications of this are uncertain, but it indicates a concern from investors.

By Luca Chandarana

Gold Reaches Record High As Investors Anticipate Fed Cut

The price of gold has made headlines this week as prices of the yellow metal have surged to reach fresh record level highs in the market, climbing above $3,580/oz. These positive moves in performance are due to factors including everlasting geopolitical uncertainty and the highly imminent cut in the target interest rate of the U.S. Central Bank.

Investing into gold has been a historically favourable action that befuddled investors look into to combat through market ups and downs. Its ancient role acted as a store of value, whilst it’s modern use as a safe-haven asset was cemented through its performances during significant global crisis including the 2008 global financial crisis caused by the U.S. housing bubble as well as the 2020 COVID-19 global pandemic.

Now turning to the key price movements of this week, gold jumped +4.04% week on week reaching $3,587 as of the time writing this, recording last Monday (01/08/2025) with a price of $3,448.

If we also look at the ETF markets, SPDR gold shares (GLD), the largest gold backed fund and one of the most popular ETFs, traded around $331 which is up 5.20% up from $318 the week prior.

Moving onto another precious metal, the price of silver also increased slightly reaching $41, just over a dollar increase from the previous week. This may suggest how investors are positioning not just in gold but across different safe-haven assets.

To get into the nitty-gritty, we can discuss the main drivers of this week’s price rally.

1. Fed rate cut anticipation The biggest catalyst that is continuing as we get closer to the Feds September 16-17th policy meeting comes from the August non-farm payrolls report released from a Bureau of Labour Statistics, which showed just 22,000 jobs added for the month, which was far below the forecast of 75,000, while the unemployment rate rose to 4.3%.

   Daniel Zhao, chief economist at jobs site Glassdoor said, “The labour market is losing lift, and August’s report, along with downward revisions, suggests we’re heading into turbulence without the soft landing achieved.”

   This weakness in job reporting immediately sparked talks of a Fed rate cut for the month following. Now the market views a rate cut as almost a certainty.

   As gold doesn’t pay dividends or interest, when a Fed rate cut occurs, yields on “safer” assets such as U.S. treasuries drop, reducing the opportunity cost of holding gold (less costly in relative terms), which increases demand.

   In addition to this a Fed cut will likely lead to a weaker dollar due to downward pressure on its exchange rate and less demand for the currency. As gold is priced in dollars, a weaker dollar makes gold cheaper for non-U.S. buyers, thus boosting international demand.

   These dynamics have been consistent drivers of gold’s bull runs in recent periods.

2. Political Uncertainty

   There has been a lot of geopolitical tensions continuing to rise this month in the background as the markets move.

   The conflict within the Middle East, particularly the ongoing unrest that is occurring in Gaza due to Israeli attacks, has kept safe-haven demand elevated as investors brace for potential spillover effects in the region.

   Both risks feed directly into the demand for save-haven assets, such as gold, as an act of hedging positions against these geopolitical shocks. This narrative has been amplified tension and political interference with the U.S. monetary policy. Goldman Sachs claims that the persistent clashes between the Federal Reserve and the White House could undermine the confidence of investors in U.S. Treasuries. This also includes the bank even suggesting that this scenario could push gold upwards of $5,000/oz.

These drivers are importance and matter not due to triggering a short-term bounce in the price, but rather creating a market environment where gold has both the immediate spark and long-term fuel to rally. Investors like gold to the trust and security they have in it, which may also be since it isn’t tied to a government or pose credit risks.

Now look ahead, the main spotlight is on the U.S. CPI release date as well as the previously mentioned Fed September policy meeting. Conclusions that indicate a softer inflation position almost guarantees a Fed cut, thus driving prices to even new highs. However, if inflation comes about to be sticky, gold may pause for breath, but safe-haven flows are unlikely to leave given the ongoing geopolitical risks.

Investors will also be vigilant looking at developments in the Middle East and energy markets, where flare-ups could reinforce even more bids for gold.

By Kishan Sharma

Markets Roundup

Markets Roundup (as of Friday the 5th of September)

| Asset | Price (Friday) | Weekly Move |

| Gold | 3,586.66 | 4% |

| Brent Crude | $65.23 | -2.97% |

| WTI Crude | 61.97 | -3.3% |

| Copper | 9,881.00 | -0.72% |