Gold breaks $4000! Currency credit is facing a "vote of no confidence".

Written by: White55, Mars Finance

The price of gold has first broken through the $4000 per ounce barrier, coinciding with the inauguration of Japan's new Prime Minister, which is not merely a coincidence but rather a concentrated outbreak of global concerns over the credibility of fiat currencies.

On October 8, 2025, the international gold price broke through the historical threshold of $4,000 per ounce, reaching a maximum of $4,059, setting a new historical high. This milestone 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"; she supports loose monetary policy and opposes interest rate hikes, while advocating for active fiscal policies. This policy direction has led to a significant drop in the yen's exchange rate against the dollar, falling below the 153 mark, marking the largest decline in five months.

The policy shift in the Three Kingdoms has shaken the foundation of monetary credit.

Political changes in Japan have triggered significant fluctuations in financial markets. After Sanae Takaichi was elected president of the Liberal Democratic Party, the yen fell sharply against the dollar, while the Japanese stock market soared. This divergent reaction reflects the market's complex expectations regarding "Takaichi economics." She advocates for a "more responsible" fiscal expansion policy and stated that the government will coordinate more closely with the Bank of Japan. This policy direction has raised concerns in the market about Japan's debt sustainability, as the country's government debt has surpassed 1,200 trillion yen, accounting for over 250% of GDP. The trend of politicizing U.S. monetary policy has intensified. Since taking office, Trump has consistently pressured the independence of the Federal Reserve, even attempting to fire Fed governor Lisa Cook on the grounds of "suspected false reporting of mortgage information." Although the Fed announced a rate cut of 25 basis points in September, the risk of political interference in central bank independence has raised concerns in the market 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 instability factors have weakened market confidence in the fiscal sustainability of the eurozone, prompting capital to flow into gold as a safe haven.

Three-stage rise, how the driving force of gold evolves

The first phase began after the outbreak of the Russia-Ukraine conflict in 2022. The action of Western countries freezing Russia's foreign exchange reserves prompted central banks around the world to seek assets "that would not be frozen by opponents" and began to significantly increase their gold holdings. The global official gold reserves are expected to reach a value of $4.64 trillion by October 2025, a surge of 52.9% compared to the end of 2024. The second phase began in April 2025. The trade war initiated by Trump weakened market confidence in "the US as a stabilizer of the global economic system" and "the core position of the dollar 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 that it would cut interest rates in response to a weak labor market, even though the inflation rate remained above the target of 2%. At the same time, the US government faced a "shutdown" due to bipartisan political disputes, further exacerbating market uncertainty.

The underlying logic of the debt crisis and currency overissue leading to the rise in gold prices.

The global debt problem continues to worsen. In 2024, U.S. interest expenditures on national debt will surpass the defense budget for the first time, becoming the largest item in fiscal spending. Major developed countries are heavily in debt, with Japan's government debt-to-GDP ratio exceeding 250%, France reaching 114%, and Italy as high as 134.8%. The debt sustainability formula is facing challenges. When the average interest rate on debt is lower than the nominal GDP growth rate, the debt-to-GDP ratio tends to decrease; conversely, it rises. From 2008 to 2022, despite a significant increase in the scale of debt, the sustainability of debt remained strong because interest rates were below the nominal GDP growth rate. Today, the situation has reversed, with Morgan Stanley predicting that by 2030, the average cost of debt repayment in developed markets will be on par with the economic growth rate. This means achieving debt sustainability will require significant cuts in spending or tax increases, which are difficult to implement politically. Monetary overexpansion has become the underlying driving force behind 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 monetary overexpansion ultimately drives the revaluation of physical assets such as gold.

Future Trends of Gold Prices: Market Divergence and Consensus

The bullish camp has a positive outlook. 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 interest 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, possibly facing "a slowdown 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 by 2025. Nearly half of the central banks plan to continue increasing their gold holdings in the next 12 months, and this demand provides a solid bottom for gold prices.

The breakthrough of gold prices surpassing $4,000 per ounce is not only a numerical milestone but also a signal of the restructuring of the global monetary system. As the U.S. debt remains high, Japan's monetary policy faces political pressure, and the sustainability of European finances is questioned, gold, as a "stateless, default-free" neutral reserve asset, is having its strategic position redefined. Central banks are also taking action to express their stance: as of September 2025, the People's Bank of China has increased its gold holdings for 11 consecutive months, yet gold accounts for only 7.7% of China's official international reserve assets, which is still significantly lower than the global average level 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.