The ongoing conflict in the Middle East and uncertainty surrounding the U.S. presidential election have prompted investors to seek safe havens, leading gold prices to climb to a historic high on October 18, with a remarkable increase of over 30% this year alone. Experts suggest that due to the unpredictable nature of the presidential election and escalating geopolitical tensions, gold prices may continue to rise.

According to a Reuters report, the spot price of gold rose by 1% to $2,720.05 per ounce around 3 PM Eastern Time on October 18, reflecting a 2.4% increase for the week. Meanwhile, U.S. gold futures increased by 0.8%, reaching $2,730.

ABC News analyzed that the recent surge in gold prices is not a fleeting trend. Since the beginning of 2024, gold prices have skyrocketed by approximately 32%, outpacing the 23% gain of the S&P 500 and the 28% rise of the tech-heavy Nasdaq index during the same period.

Analysts indicate that the prolonged strength of gold prices can largely be attributed to market expectations regarding the Federal Reserve’s interest rate cuts. Historically, there has been an inverse relationship between interest rates and gold prices. In simpler terms, as the likelihood of interest rate hikes increases, economic expansion typically decreases demand for safe-haven assets like gold. Conversely, lower interest rates often drive gold prices higher.

Additionally, analysts point out that central banks globally are competing to increase their gold reserves, while investors seek to diversify their portfolios and find safety amidst global unrest. This sustained demand has further supported rising gold prices. However, some experts caution that the frequent monthly or weekly fluctuations in gold prices may complicate market timing for investors.

Experts cite the substantial demand for gold from central banks, especially from the People’s Bank of China, as another key factor behind rising gold prices. According to the World Gold Council (WGC), central banks around the world have been purchasing over 1,000 tons of gold annually for the past two years, a significant increase compared to previous years.

China leads the charge among countries looking to reduce their dependence on the U.S. dollar by increasing gold reserves. As of May this year, the People’s Bank of China has been buying gold for 18 consecutive months. However, the WGC noted in July that the pace of gold purchases by the Chinese central bank has slowed in recent months, with no purchases made in the last five months.

Campbell Harvey, a professor at Duke University’s Fuqua School of Business, explained, “Tensions in U.S.-China relations have been ongoing for quite a while, worsening over the past year. It’s entirely reasonable for China to seek to diminish its reliance on the dollar, which implies the need for alternatives, with gold being a reliable option.”

Furthermore, as investor sentiment around potential Federal Reserve rate cuts grows, gold prices have continued their upward trajectory in recent months. Experts suggest that heightened geopolitical uncertainty during this period has made gold an attractive option for risk-averse investors.

The Federal Reserve recently cut interest rates for the first time in over four years in September. The CME FedWatch Tool indicates there is more than a 90% probability that the U.S. will see another rate cut in November.

Jim Wyckoff, a senior market analyst at Kitco Metals, highlighted that the market’s uncertainty regarding the outcome of the U.S. presidential election adds to the unpredictability, which typically fuels demand for gold as a safe haven.