The price of gold rose today to $4,010 per ounce, but could rise further to $4,900 by next year, “as the U.S. government shutdown and the political crisis in France sustained volatility in financial markets,” reports Bloomberg News. “The political shakeups in France and Japan are adding to fiscal concerns and contributing to the rally in gold…Goldman Sachs Group Inc raised its price forecast for December 2026 to $4,900 an ounce, up from $4,300, citing ETF inflows and central-bank buying.”
Gold is expensive by historical standards: gold cost only $271 per ounce back in 2001. It is about 15 times as expensive today. Back in 2001, people had confidence in the U.S. dollar, and didn’t see a need to invest in gold, because the federal government was running a surplus of $127 billion, inflation was lower than in the 1970s and 1980s, and state and local governments had much less unfunded pension liabilities and less wasteful spending than they do today. Today, it often seems like both political parties are irresponsible at the federal level (at the state level, the GOP tends to be more responsible than the Democrats, but at the federal level, both political parties are deeply irresponsible in managing the nation’s finances).
But other things you could invest in now are expensive, too. So is the stock market — the average stock price is higher compared to earnings than it ever has been except in deep recessions. And housing prices have risen a lot over the last 5 years, so housing is also an expensive investment. So gold may not look all that expensive by comparison.
People are reluctant to leave their money in savings accounts due to inflation, falling interest rates, and taxes that are levied on bank interest (even when bank interest is less than inflation). So some people buy gold with their savings.
Bloomberg News notes that the price of gold bullion rose further today
after closing 1.9% higher on Monday. The suspension in federal operations that’s now stretching into its second week has deprived investors of key data needed to gauge the health of the US economy, while the Federal Reserve struggles to assess changing conditions. Traders are still pricing in a quarter-point cut this month, which should benefit gold as it doesn’t pay interest.
In France, Sebastien Lecornu resigned as prime minister, after failed attempts to reach a consensus on budget spending with political parties, with the deadlock thwarting attempts to rein in the largest fiscal deficit in the euro area. Meanwhile, Sanae Takaichi’s near-certain elevation as the next Japanese prime minister has also jolted financial markets.
The political shakeups in France and Japan are adding to fiscal concerns and contributing to the rally in gold… “A mix of retail (especially in Europe and Japan) and institutional inflows have driven” the latest surge…US President Donald Trump has set the scene for gold’s surge of around 50% this year, as his aggressive moves to reshape global trade and geopolitics spurred a flight to safety and a move away from the dollar. Central banks and gold-backed exchange-traded funds have been enthusiastic buyers, while the Fed’s interest-rate cut, and the prospect of more to come, has helped recently.Meanwhile, the People’s Bank of China extended its gold buying streak in September for an 11th consecutive month as bullion climbed to fresh record levels. Reflecting the positive mood, Goldman Sachs Group Inc. — a long-standing bull on gold — raised its price forecast for December 2026 to $4,900 an ounce, up from $4,300….citing ETF inflows and central-bank buying. “I’d suggest overweight in gold — despite its high price — as a hedge against the US dollar and preparing for more shocks to come,” said David Chao, a global market strategist at Invesco Asset Management. Allocation to gold as a percentage of investors’ portfolios is likely currently in the low single digits — but a level of around 5% is “a prudent measure to me,” he added.
