Gold prices rise to all-time highs with US debt mounting, election uncertainty

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Gold prices reached new record highs this week amid uncertainty surrounding the upcoming election and the rising U.S. national debt.

Prices for gold futures have risen over 32% year to date and more than 38% in the past year and have set a number of new all-time highs in the process.

Gold reached new records of $2,738 on Monday and $2,760 on Tuesday, before paring back some of those gains and closing at $2,749 on Thursday.

Investors have turned to gold as a safe haven from a variety of geopolitical risks in the past year, including the ongoing conflicts in the Middle East and Ukraine. Uncertainty surrounding the direction of U.S. economic policy after the election, as well as the Fed's rate cutting plans and long-term trajectory of the growing national debt have also bolstered investment in gold.

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Gold prices have risen to record highs this week amid uncertainty around the upcoming election and widening budget deficits. (Photo by ARNE DEDERT/dpa/AFP via Getty Images / Getty Images)

"What we're really seeing is gold continuing to be viewed as a quintessential hedge against inflationary pressures along with the safe-haven demand and fund inflows, gold continues to be extremely well supported," said David Meger, director of metals trading at High Ridge Futures.

"Uncertainty leading into the U.S. election is one additional pillar of support for the gold market, given the unease that the market may be feeling going into the election,"

ANZ said in a note that, "Concerns around the rising U.S. fiscal debt outlook is strengthening the investment case for gold."

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The federal government's budget deficit widened to $1.8 trillion in FY2024 and is projected to continue to grow in the years ahead. (istock / iStock)

The federal government's budget deficit topped $1.8 trillion in fiscal year 2024, which concluded at the end of September. That amounted to the third-largest budget deficit in history and trails only the FY2020 and FY2021 deficits that occurred amid elevated federal spending due to the COVID pandemic and related economic disruptions.

Deficits are projected to continue to rise in the years ahead, with the nonpartisan Congressional Budget Office (CBO) projecting that annual budget deficits will surpass $2 trillion a year starting in FY2030 and will be nearly $2.9 trillion just four years later.

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Both Vice President Harris and former President Trump have released economic plans that are projected to cause the deficit to widen at a faster pace over the next decade than what would occur under the CBO's projection. The CBO baseline has projected that the debt-to-GDP ratio, which compares the debt held by the public to the size of the U.S. economy, will break a record set in 1946 during the next four-year presidential term.

Continued federal spending and deficits as well as the Federal Reserve's plan to address stubborn inflation have caused yields on another safe haven for investors, U.S. Treasurys, to rise despite the expectation the central bank will cut rates again in November.

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Bob Haberkorn, senior market strategist at RJO Futures, said in a Reuters report Wednesday that while gold is "going to have a hard time moving higher given where yields are headed," though he added that gold could reach $2,800 an ounce as early as the end of this week on safe-haven demand.

Reuters contributed to this report.