Author: White55, Mars Finance

The price of gold has first broken through the $4,000 per ounce mark, coinciding with the inauguration of Japan's new Prime Minister, which is not a mere coincidence but a concentrated outbreak of global concerns over the credibility of fiat currencies.

On October 8, 2025, international gold prices surpassed the historical threshold of $4,000 per ounce, reaching a peak of $4,059, setting a new historical high. This milestone event coincided with the inauguration of Japan's new Prime Minister, Sanae Takaichi, reflecting a global loss of confidence in the fiat currency system. Takaichi's policy proposals bear a clear imprint of "Abenomics," as she supports loose monetary policy and opposes interest rate hikes while advocating for active fiscal policies. This policy direction has led to a significant depreciation of the yen against the dollar, falling below the 153 mark, marking the largest decline in five months.

Policy Shifts in Three Countries, Erosion of Monetary Credibility

The political changes in Japan have triggered severe fluctuations in the financial markets. After Takaichi was elected president of the Liberal Democratic Party, the yen promptly depreciated against the dollar, while the Japanese stock market surged. This divergent reaction reflects the market's complex expectations regarding "Takaichi Economics." She advocates for a "more responsible" fiscal expansion policy and has stated that the government will coordinate more closely with the Bank of Japan. This policy direction has raised concerns about the sustainability of Japan's debt, which has exceeded 1,200 trillion yen, accounting for over 250% of GDP. The trend of politicizing U.S. monetary policy has intensified. After taking office, Trump continuously pressured the Federal Reserve's independence, even attempting to dismiss Fed Governor Lisa Cook on the grounds of "suspected false reporting of mortgage information." Although the Fed announced a 25 basis point rate cut in September, the risk of political interference in the central bank's independence has raised market concerns about the long-term value of the dollar. The independence of the European Central Bank faces potential pressure. France has changed four prime ministers in just over a year, while populist parties in Germany and France are leading in polls. These political instabilities have weakened market confidence in the fiscal sustainability of the Eurozone, driving funds towards gold as a safe haven.

Three Phases of Increase, How the Drivers of Gold Evolve

The first phase began after the outbreak of the Russia-Ukraine conflict in 2022. The freezing of Russia's foreign exchange reserves by Western countries prompted central banks worldwide to seek "assets that cannot be frozen by adversaries," leading to a significant increase in gold holdings. The value of global official gold reserves reached $4.64 trillion in October 2025, a staggering 52.9% increase from the end of 2024. The second phase began in April 2025. The trade war initiated by Trump weakened market trust in "the U.S. as a stabilizer of the global economic system" and "the dollar's core position in that system." The trend of de-dollarization accelerated, with emerging market central banks continuing to increase the proportion of gold in their reserve assets to reduce dependence on the dollar. The third phase began at the end of August 2025. The Federal Reserve signaled a rate cut to address a weak labor market, even though inflation remained above the 2% target. At the same time, the U.S. government faced a "shutdown" due to bipartisan political disputes, further exacerbating market uncertainty.

Debt Crisis and Currency Overissuance, The Underlying Logic of Gold's Rise

The global debt problem continues to worsen. In 2024, U.S. interest payments on national debt surpassed defense spending for the first time, becoming the largest item of fiscal expenditure. Major developed countries are heavily indebted, with Japan's government debt exceeding 250% of GDP, France at 114%, and Italy even reaching 134.8%. The debt sustainability formula faces challenges. When the average interest rate on debt is lower than the nominal GDP growth rate, the debt-to-GDP ratio tends to decline; conversely, it rises. From 2008 to 2022, despite a significant increase in debt levels, the sustainability of debt remained strong due to interest rates being below the nominal GDP growth rate. The situation has now reversed, with Morgan Stanley predicting that by 2030, the average debt repayment cost in developed markets will equal the economic growth rate. This means achieving debt sustainability will require significant spending cuts or tax increases, which are politically difficult to implement. Currency overissuance has become the underlying driving force for the rise in gold prices. The Federal Reserve's balance sheet has expanded from $4.2 trillion before the pandemic to the current $6.6 trillion, a net increase of $2.4 trillion. This global currency overissuance ultimately drives the revaluation of physical assets like gold.

Future Trends in Gold Prices, Market Divergence and Consensus

The bullish camp holds a positive view. Goldman Sachs has raised its gold price forecast for the end of 2026 from $4,300 per ounce to $4,900. Citibank believes that if the Federal Reserve continues to cut rates in 2026, gold could challenge the $5,000 mark. Cautious voices also exist. Bank of America believes that gold has realized most of its upward expectations and is currently slightly overbought, potentially facing "fatigue in upward momentum." UBS predicts that gold prices may pull back to $3,800 in the short term but will rise to $4,200 in the medium to long term. Central bank gold purchases provide structural support. Global central banks have net purchased gold for 15 consecutive years, with annual gold purchases by central banks expected to reach 80 tons in 2025. Nearly half of the central banks plan to continue increasing their gold holdings in the next 12 months, providing a solid bottom for gold prices.

The price of gold breaking through $4,000 per ounce is not just a numerical milestone but a signal of the restructuring of the global monetary system. With high U.S. debt, political pressure on Japan's monetary policy, and questions about the fiscal sustainability of Europe, gold, as a "stateless, no-default-risk" neutral reserve asset, is having its strategic position redefined. Central banks are also indicating their stance through actions: as of September 2025, the People's Bank of China has increased its gold holdings for 11 consecutive months, but gold accounts for only 7.7% of China's official international reserve assets, significantly lower than the global average of around 15%. This gap suggests that the demand for central bank gold purchases may continue to exist, providing long-term support for gold prices.

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