Gold soars to fresh record ahead of…

29 Eylül 2025

Gold soars to fresh record ahead of a potential geopolitical shock(s)

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold surged to a new record high this week, climbing beyond $3,818 /oz for the first time and gaining more than 1% on the day.

The rapid rally in gold is driven by mounting fears of a potential geopolitical shock across the Middle East, Ukraine, and possibly China. This strength comes despite sticky inflation confirmed by the latest Core PCE data, which has reduced the likelihood of a 50-basis-point cumulative rate cut before year-end. Gold’s advance therefore appears fueled more by risk aversion than by monetary easing hopes.

Developments in the Middle East remain central to this shift in sentiment. According to Bloomberg, Alan Eyre, former senior U.S. diplomat and fellow at the Middle East Institute, warned that another flare-up between Iran and Israel is “very likely,” reflecting Israel’s view of Iran not only as a nuclear threat but as an existential one.

That assessment appears to be reinforced by reporting from the Associated Press, which shows Iran rapidly rebuilding missile-production sites targeted by Israel during the June conflict. While key components such as planetary mixers for solid-fuel missiles remain absent, China is believed to be a potential supplier, sustaining Iran’s ability to restore its deterrence. This determination to rebuild despite sanctions highlights Tehran’s view of missile capability as a strategic cornerstone it will not abandon.

The Foreign Policy previously reported last month, Israel and Iran may be heading toward another war before December, with Tehran expected to strike decisively to counter Israel’s preemptive strategy. Such an outcome would not only destabilize the region but also reinforce the case for gold as investors seek to hedge against an unpredictable security environment.

These concerns are amplified by political signals in Washington. The Washington Post reported last week that Defense Secretary Pete Hegseth has ordered an unprecedented gathering of hundreds of U.S. generals and admirals in Virginia, with President Trump himself attending. The move has drawn scrutiny amid fears of politicization within the military at a time of heightened global risks.

It is extremely likely that this historically unprecedented meeting is for strategic purposes or in preparation for an anticipated phase of escalation, whether on the front with Russia or China.

Tensions are not limited to the Middle East. According to the New York Times, Russia has escalated provocations in Europe through drone incursions into NATO states, naval confrontations in the Baltic, and disinformation campaigns in Moldova’s election. This surge of aggressive actions comes as U.S. commitment under President Trump is perceived to be waning, testing European resilience and amplifying divisions within NATO over how to respond without falling into an escalation trap.

Against this backdrop, the Wall Street Journal noted that Trump signaled a potential policy shift by showing openness to allowing Ukraine to use long-range U.S. weapons, a move that would mark a reversal from earlier restrictions. This development was welcomed by European leaders, who see it as a vital reinforcement of Western resolve against Moscow.

This shift by the US administration toward supporting targeting Russian territory may also represent a starting point for escalation and counter-escalation.

The combined geopolitical risks are not just matters of security but also bear economic consequences.

While geopolitics dominate headlines, underlying economic signals are flashing caution. Mark Skousen, writing in the Wall Street Journal, pointed in an opinion piece to gross output (GO) data showing that business spending fell by an annualized 5.6% in the second quarter, in sharp contrast to the upbeat GDP figure of 3.8%. He argues that consumer spending alone does not sustain the economy, as business investment is both larger and more volatile. This divergence between resilient consumption and weakening business outlays reflects the drag of trade war tariffs and underlines a recessionary risk often obscured by GDP.

Markets are therefore confronting a dual challenge. On one hand, geopolitical instability is driving flows into safe havens such as gold. On the other, structural economic indicators reveal fragility beneath the surface of growth, with the business cycle already signaling potential contraction.

This week’s labor market reports, including JOLTS, ADP, and nonfarm payrolls, alongside ISM services and manufacturing data, will be crucial in shaping whether the Federal Reserve stays on track toward a 50-basis-point rate cut by year-end. Investors are likely to weigh these numbers against the backdrop of military uncertainty, trade war repercussions, and the persistence of inflationary pressures.

 

Zaid Barem / ymm