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Gold reaches record price of $4,000; stocks boosted by rate outlook

Investors jumped on the news of lower interest rates on Wednesday. They also shrugged off the political turmoil in France and Japan. Meanwhile, a prolonged U.S. shutdown pushed gold to $4,000 an ounce, a record high.

Gold prices have risen by more than 50% in the past year, to over $4,000 per ounce. This is due to the prospect of Federal Reserve rate cuts and the demand for safe-haven assets resulting from economic and political concerns.

Gold is traditionally seen as a safe haven of value in times of uncertainty. The weaker dollar has also been a factor in this rally. It was driven by central banks, retail traders, and fund managers.

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Chris Weston is the head of research for Pepperstone.

Thierry Wizman is a global FX & Rates Strategist at Macquarie Group. He said that gold's rally was the collective "hedge", against the potential failure of Wall Street’s AI-driven technology boom.

"A collapse in that optimistic "vision" could trigger an inflationary solution for the world's overhang of sovereign debt, instead of a productivity-based solution."

European stocks rose 0.4% as gains in energy and banks helped offset a decline in autos. BMW shares fell 7% after the German luxury automobile maker cut its earnings forecast for 2025.

U.S. Stock Futures are up by 0.1-0.25, indicating that New York will see more gains later.

In France, caretaker Prime Minister

Sebastien Lecornu

On Wednesday, the government said that a budget agreement could be reached by the end of the year. This would reduce the likelihood of an early election.

His cautiously positive tone helped a modest rise in French bonds. OAT yields fell 4.5 basis points for the day to 3.524%. However, it did not help the euro which was headed for a third consecutive daily loss, trading at around $1.1628, its lowest level in over a month.

Nina Stanojevic is a senior investment specialist with St. James's Place. She said, "It's a new prime minister, and the market has been volatile."

It raises two areas for uncertainty. First, it is unclear if we will have another snap election in the near future. This would impact French OATs.

YEN SLIDES

This week, political shifts in Japan have also pushed the yen down. Investors are waiting for the announcement of Sanae Takaichi, who is expected to become prime minister in the near future. The last time it was 152.40 dollars per yen.

Investors are concerned about Takaichi’s weekend victory, as her preference for lower interest rates and increased spending may have an impact on the Bank of Japan. The Bank of Japan might not be able to raise rates as much in the future as expected. This has weighed down the yen.

The yen has dropped over 3% in the past week. This is on track to be its steepest weekly drop in an entire year. This has sparked fears of Japanese intervention.

Hirofumi Suzuki, chief currency strategist of SMBC, stated that if the yen headed towards 160 in one to two weeks "FX interventions by the Japanese Government would be viewed more likely".

The New Zealand Dollar fell by nearly 1% following the

Central bank

The Fed slashed the benchmark rate by fifty basis points, and left the door wide open for more easing. This suggests that policymakers are worried about the fragile state of the economy.

The dollar index (which measures the U.S. dollar against six other currencies) hit its highest level since the end August. However, sentiment was still gloomy as the shutdown entered its eight day.

The shutdown also prevented the publication of several key economic reports. The Federal Reserve is expected to reduce rates by 45 basis points between now and year's end, according to the markets.

Investors dismissed concerns about an excess of supply this year, and oil prices rose on Wednesday. Brent crude futures increased 0.8% to $65.97 per barrel. U.S. West Texas Intermediate Crude increased by 0.9% to reach $62.28. (Dhara Ranasinghe and Ankur Banerjee contributed additional reporting from London and Singapore, respectively; Sam Holmes and Sharon Singleton edited the article).

(source: Reuters)