Gold Surges as Geopolitical Uncertainty Drives Safe-Haven Demand

As of September 16, 2025, gold prices reached new record highs in several markets, with retail gold prices in China peaking at 1,091 yuan per gram. This marked a significant increase from earlier in the year, with the price climbing by approximately 9.78 yuan per gram compared to the previous trading session. Meanwhile, the Shanghai Gold Exchange reported a rise in various gold contracts, with the gold T+D contract hitting 836.03 yuan per gram, reflecting a 0.89% increase from its opening price of 829.48 yuan per gram. Similar gains were observed in other contracts, including the iGold 9999 and gold 9999 varieties, which both closed at 837.00 yuan per gram and 836.00 yuan per gram, respectively.

The surge in gold prices is attributed to multiple factors, including geopolitical tensions, inflationary pressures, and shifting investor sentiment. Analysts note that the recent rally in gold prices aligns with broader macroeconomic conditions, such as rising interest rates and supply chain disruptions. In particular, the gold market experienced a sudden shift from contango to backwardation in early 2020, which was triggered by the global economic uncertainty caused by the COVID-19 pandemic. This shift led to a surge in demand for physical gold, as investors sought safe-haven assets amid market volatility. The phenomenon of contango, where the futures price of a commodity is higher than its spot price, has historically been a normal condition for gold, as it reflects the cost of carry. However, prolonged periods of contango can signal an oversupply of gold or a lack of demand, which can lead to downward pressure on spot prices.

Investors and traders are closely monitoring the shape of the gold futures curve, as it provides insight into market expectations for future supply and demand. When the futures curve is upward sloping—indicating contango—it generally reflects the cost of carrying physical gold, such as storage and insurance expenses. In the case of gold, contango is common due to its durable and easily storable nature. Conversely, when the curve slopes downward—indicating backwardation—it suggests that the spot price is higher than the futures price, signaling potential short-term imbalances in the gold market. These shifts in the futures curve can influence investment strategies, particularly for those utilizing roll yield or physical delivery approaches.

The current gold price surge has also had a notable impact on related precious metals, including silver. While gold prices soared, silver prices also rose, with the silver T+D contract reaching 10,071 yuan per kilogram, a 0.77% increase from its opening price of 10,033 yuan per kilogram. However, unlike gold, silver has historically been more volatile and susceptible to contango conditions due to its higher storage costs and lower liquidity. This volatility can create both opportunities and risks for investors, particularly those engaging in arbitrage or options trading.

Looking at the broader investment landscape, gold has historically outperformed other major asset classes during periods of economic uncertainty and inflation. For instance, in the past 50 years, gold has topped the annual performance table of U.S. asset classes on five occasions, particularly during times of high inflation and market downturns. Notably, gold has often served as a hedge against equities, real estate, and bond market risks, making it an essential component of a well-diversified investment portfolio. Despite its strong performance in certain periods, gold has also experienced significant drawdowns, such as the 32% loss in 1981 and the 28% decline in 2013. These fluctuations highlight the importance of a balanced approach to precious metals investing.