Gold prices have soared more than 50% so far this year, delivering mammoth returns for traders holding the safe haven investment. But the run-up in the value of gold could portend a downturn for the U.S. economy, some analysts told ABC News.
The spike in gold prices has proven especially pronounced in recent weeks, climbing nearly 20% since mid-August and far outpacing the U.S. stock market. That period has coincided with data releases indicating a sharp labor market slowdown, which some observers consider a harbinger of a possible recession.
In recent days, a government shutdown has added to the nation’s economic risk and halted key data releases that could otherwise reassure onlookers.
Gold offers investors a hedge against an uneasy financial environment as policymakers weather the uncertain environment, analysts said. Stress in long-term bond markets and a devaluation of the U.S. dollar have unsettled alternative assets typically viewed as low-risk investments, they added.
“There’s no way you can interpret these exploding gold prices as a good sign — they’re a warning sign,” Paolo Pasquariello, professor of finance at the University of Michigan, told ABC News. “There’s clearly a case to be made that these high gold prices are a leading indicator of troublesome times ahead for the U.S. economy.”
The run-up in gold prices comes after a steep drop-off in monthly hiring and a gradual rise in inflation.
A jobs report last month showed a sharp decrease in hiring in August, extending a lackluster period for the labor market. Meanwhile, a revision of previous hiring estimates days later revealed the U.S. economy added far fewer jobs in 2024 and early 2025 than previously estimated, deepening concern about the health of the U.S. job market.
Some analysts also pointed to broader uncertainty, including the ongoing Russia-Ukraine war and sharp partisan division in U.S. politics.
Ray Dalio, the billionaire founder of hedge fund Bridgewater Associates, told Bloomberg on Friday of the potential for a “civil war of sorts” in the U.S., urging investors to buy gold as a hedge against market turmoil.
The spike in gold prices traces to additional factors beyond economic unrest, however. Investors widely expect the Federal Reserve to cut interest rates later this month in an effort to counteract the labor market slowdown, which would mark two consecutive rate reductions.
Futures-options traders work on the floor at the American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York, Oct. 2, 2025.
Brendan McDermid/Reuters
Lower interest rates establish financial conditions favorable toward gold, since they reduce the comparative benefit of interest-bearing investments such as savings accounts, Aakash Doshi, head of gold strategy at State Street Investment Management, told ABC News.
“The Fed resuming its rate-cutting cycle could benefit gold,” Doshi said.
The flight toward gold has coincided with a depreciation in the value of the U.S. dollar. Its value against other currencies plunged about 11% over the first half of 2025, the biggest decline in more than 50 years, a Morgan Stanley report in August found.
The decline in the U.S. dollar’s value reflects a shift away from global dependence on the dollar as a global reserve currency, as investors take note of changes in U.S. economic policy and Trump’s pressure campaign against the Fed, analysts said.
“Investors are getting nervous about all the traditionally safe U.S. assets like treasury securities,” Pasquariello said. “Where else will they put money? Gold.”
Despite banner performance this year, gold prices carry volatility of their own, especially when buyers enter the market at a high point, risking losses instead of a security blanket.
“Gold and silver are in a boom cycle right now, but you can bet they’ll be in a bust period sooner than investors expect,” Jim Wyckoff, senior market analyst at Kitco Metals, told ABC News.
For now, however, a burst of economic and political uncertainty has sent investors running to safety, Wyckoff said. “It’s spilling into safe-haven demand for gold,” he added.