Gold Prices Reach Record High Amid Political Uncertainty

Gold prices hit a record high in Asian trade on Wednesday, driven by safe haven demand from increased political uncertainty in the U.S. and Japan, along with anticipation for interest rate cues.

Initially, gold had a slow start when a less severe attack by Israel on Iran raised hopes of easing Middle Eastern tensions. However, demand remained strong due to the tense atmosphere ahead of the upcoming 2024 U.S. presidential election, scheduled for November 5.

Japan's political landscape added to investor anxiety after the ruling Liberal Democratic Party (LDP) lost its parliamentary majority in a recent election.

Spot gold rose 0.3% to a record high of $2,779.81 per ounce, while December futures climbed 0.3% to $2,791.90 per ounce.

Election Uncertainty Boosts Gold Demand

As the presidential election in November approaches, markets are on edge. Donald Trump and Kamala Harris are locked in a tight race, with recent polls showing Trump gaining a slight edge, though analysts note it remains too close to call.

The diverging economic plans proposed by Trump and Harris contribute to heightened uncertainty regarding future U.S. policy. Political uncertainty in Japan, following the LDP’s election loss, adds to gold’s appeal as a safe haven asset. Now, the LDP must form alliances with smaller parties to maintain control, which may weaken governance.

Tensions in the Middle East linger as Iran vows retaliation against Israel's recent strike, with continued Israeli attacks on Hamas and Hezbollah complicating the possibility of conflict de-escalation.

Economic Data and Rate Uncertainty Loom

Markets are also anticipating forthcoming economic data and interest rate decisions. Third-quarter GDP data is expected on Thursday, followed by the PCE price index and nonfarm payrolls on Friday.

These reports precede a Federal Reserve meeting, where a smaller 25 basis point cut is widely anticipated. Lower U.S. interest rates typically favor non-yielding assets like gold.

Other precious metals experienced gains due to safe haven demand; platinum futures rose 0.2% to $1,061.60 per ounce, and silver futures increased 0.4% to $34.570 per ounce. Meanwhile, benchmark copper futures on the London Metal Exchange remained flat at $9,560.50 per ton, still facing significant losses for October.