Global Economy: Gold Hits Record High, France Eases Political Panic, and Germany Falters Again
France’s political drama sent tremors through markets earlier in the week - but by Friday, investors appeared to breathe a sigh of relief.
After a brief resignation and reappointment of Prime Minister Sébastien Lecornu, French bond yields eased and equities clawed back their losses, hinting that the immediate panic had subsided. The yield gap between France’s 10-year bonds and Germany’s narrowed from its highest level in over a decade, giving President Emmanuel Macron a momentary reprieve in a crisis that continues to test his political control.
Across the globe, however, markets were moving to a very different rhythm – one dominated by gold. The precious metal shattered records, crossing the $4,000-per-ounce mark for the first time in history. That milestone not only marks a doubling in price from two years ago but also cements gold’s position as a standout performer of the century, outpacing both U.S. and global equities. The surge is so dramatic that Australia now expects gold to surpass liquefied natural gas as its second most valuable export, underscoring the global shift toward hard-asset demand amid geopolitical tension and economic uncertainty.
Meanwhile, central banks remained divided in their approaches to monetary policy. New Zealand delivered a steeper rate cut than anticipated, while nations such as Poland, Kenya, and the Philippines also eased. By contrast, others including Romania, Iceland, and Peru opted for caution, keeping rates unchanged. Kazakhstan, battling surging inflation, raised rates to an all-time high – highlighting how fragmented global policy responses have become.
In Europe, Macron’s political balancing act mirrors Germany’s ongoing economic troubles. Berlin’s industrial output slumped 4.3% in August – its sharpest decline since early 2022 – signaling continued weakness in Europe’s biggest economy. Analysts point to tariffs, high energy costs, and growing competition from China as key drivers of the downturn.
In Asia, gold’s rally is rewriting Australia’s economic outlook. Officials now expect gold to fill some of the revenue gap left by softer iron ore exports, though consumer confidence there has fallen to a six-month low as inflation remains sticky and expectations for rate cuts fade.
Across the Atlantic, the U.S. continues to grapple with a flood of new regulations even as Treasury Secretary Scott Bessent touts deregulation as an underappreciated cornerstone of President Trump’s economic agenda. While tax and tariff policies are easy to measure, he said, the benefits of deregulation “take time to materialize.”
Still, American exporters are already feeling the sting of tariffs. U.S. liquor producers have seen overseas sales slump as trade partners impose retaliatory duties, with Canadian retailers reportedly shunning American spirits altogether.
Elsewhere, new analysis from the Dallas Fed offers a silver lining: slower job growth may not spell trouble for the economy. Thanks to reduced immigration, the so-called “breakeven employment rate” – the number of new jobs needed to maintain stable unemployment – has plunged to around 30,000 per month, far below the 250,000 seen just two years ago.
In emerging markets, inflation in Chile ticked higher in line with expectations, complicating the timing of its next rate cut, while Argentina’s government continued burning through foreign reserves to defend the peso – reportedly selling over $1.5 billion last week alone. Traders estimate that Argentina may have less than $700 million left in liquid dollar reserves, adding fresh urgency to the country’s financial woes.
Source: Bloomberg
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