By Felipe Barragán, Expert Research Strategist at Pepperstone
October 7, 2025 –
“Gold started the week on an unequivocally positive note, with safe-haven demand returning as the partial US government shutdown drags on and the market redraws the risk map ahead of the Federal Reserve meeting.
The symbolic US$3,900 per ounce mark was left behind during the session, a milestone that is not due to a single headline but rather to the overlap of a blocked Washington—with threats of mass layoffs in the administration if negotiations remain deadlocked—and the reading that the Fed’s next messages will validate further cuts if activity loses momentum. This combination (fiscal uncertainty and lower opportunity cost) is currently the immediate driver of the metal.
Added to this backdrop is a tactical element: the readjustment of traditional “safe haven” currencies following the political shift in Japan. The weakness of the yen after the change in leadership left some managers without classic hedging and marginally increased the attractiveness of a long position in gold as the purest shield against policy shocks. The momentum dynamic itself—historic highs that attract flows—also played its part, pushing lagging participants to jump on the bandwagon at the possibility of testing the psychological barrier of US$4,000.
But what is sustaining the scaffolding is not just the current situation. Behind the glitz is a structural foundation that has been months in the making: persistent purchases by central banks—especially emerging markets that are diversifying: persistent purchases by central banks—especially emerging markets diversifying their reserves—and inflows into physical ETFs consolidate gold as a core component in multi-asset portfolios, not just as a last-minute hedge. These two pillars have given depth to the rally and cushion profit-taking when daily momentum slows.
From here on out, the script is clear but sensitive to nuances. If the federal shutdown continues and the Fed signals further easing—or, at least, avoids contradicting market expectations—support for gold will remain and the narrative of a “US$4,000 threshold” will gain traction.
A tougher stance from the Fed, a quick resolution of the fiscal front in Washington, or a broad rebound in the dollar could force a technical respite, with consolidation on the gains of recent weeks. Meanwhile, each new high reinforces gold’s role as a macro risk premium asset in a world where politics competes with data to define asset prices.
However, demand for financial refuge reigns supreme today, with the US contributing political noise and the Fed adding to the conviction that the cost of carry will continue to fall; Japan adds a currency nuance and structural flows do the rest. At this crossroads, the metal does not need any big surprises to sustain its levels; it just needs no sudden, compelling reason to unwind the hedge.”