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By Lucy Raitano, Naomi Rovnick and Amanda Cooper LONDON (Reuters) -Investors are testing well-established views about gold, which is surging to new records, as an AI-driven stocks rally and red-hot bitcoin force a rethink of what's driving one of the world's oldest asset classes. Gold topped $4,000 an ounce for the first time this week and with a 53% gain in 2025, is heading for its best year since 1979, trouncing bitcoin's 30% rise and the 15% increase in the S&P 500 plus its array of tech titans. Typically, the metal thrives when investors fret over inflation, economic slowdown or potential market turmoil. Conversely, when investors' risk appetite improves, it tends to lag shinier alternatives that do not require extra cash to store or insure them. That dynamic was at play in 1980, when gold surged as U.S. inflation peaked above 13% and tanked the economy and stocks, and in early 2008, when the global financial crisis wiped 32% off Wall Street shares in six months. GOLD AND STOCKS' UNUSUAL TANDEM TRIP But gold is now soaring together with stocks and bitcoin, as investors bet heavily on U.S. rate cuts and concern grows about the dollar's role as the world's top reserve currency. "When you have a paradigm shift in how the current economic system is working, we’ve found in history that people always move to gold," said Pictet senior multi-asset strategist Arun Sai. "Think of it as the ultimate debasement hedge." Political drama is rife, France's budget problems and concerns about the independence of central banks are unnerving investors, while war in Ukraine continues and the first signs of a Gaza peace deal are emerging. The artificial intelligence boom is driving Wall Street, raising concerns of a bubble, while President Donald Trump's big spending plans, along with his tariffs and attacks on the Fed have undermined Treasuries and the dollar, which is down 10% against other major currencies this year. JPMorgan Chase CEO Jamie Dimon reckons there is a heightened risk of a significant U.S. stocks correction within the next six months to two years. Tariffs have further stoked fears of inflation, another bullish factor for gold.   "It feels like we are at an inflection point for inflation," said Michael Metcalfe, head of macro strategy at State Street. Anxiety about Fed independence and inflation could be two sides of the same story for gold, because of the notion that the world's most influential central bank may stand by as tariff-driven inflation intensifies. Inflation across the G7 group of richest nations averaged 2.4% in September, versus 1.7% 12 months ago and most of their central banks are either cutting rates or standing pat. Trump, meanwhile, has volleyed insults at Fed chair Jerome Powell, is attempting to sack one Fed official and nominated ally Stephen Miran as a governor. Since August, gold has jumped by about 20%. SPILLOVER FROM STOCKS TO GOLD The U.S. labour market is slowing, but other economic indicators are resilient, while inflation expectations are rising. Traders anticipate U.S. rate cuts into 2026, helping equities and gold. Rhona O’Connell, head of market analysis, EMEA and Asia at StoneX, says the "efficient frontier" partly explains why gold is up in tandem with stocks. The sweet spot is where a portfolio manager generates the most return for the amount of risk they will tolerate. Gold often moves inversely to stocks, making it a good risk mitigator, she said. When gold rises, managers can add some to their holdings to offset the risk of stocks falling, while bagging extra return. "When you’ve got equities on a massive great tear like this, some of that additional value in the equity markets will spillover into additional gold holdings," O'Connell said. Gerry Fowler, head of equity strategy at UBS, flagged increased retail demand as reading across to the gold price. "Every time somebody puts more money into the gold ETF, the ETF has to then go buy physical gold," he said, adding that this is not the only part of the market where what he dubbed "bubbly behaviour" and "retail enthusiasm" is showing up. AN AI HEDGE Growing worry over a possible AI-driven stocks crash, with the Bank of England and the IMF voicing concern, means gold is serving as a hedge for that too. "People are equally bullish about AI as they are about gold," Trevor Greetham, head of multi-asset at Royal London Asset Management, said. "If there were a deep recession and a crash in AI you might find gold goes up another leg." Gold's rise has been mostly down to waning confidence in the dollar. Central banks have been avid buyers, now holding about a quarter of their reserves in bullion, one way of shifting away from the dollar. Nutshell Asset Management CIO Mark Ellis said he expected the trend to continue, as U.S. tariffs prompt exporters to seek new markets, thereby reducing their reliance on the dollar.  His main take on the latest gold boom? "It's Donald Trump," he said.  (Reporting by Amanda Cooper, Lucy Raitano and Naomi Rovnick; Editing by Dhara Ranasinghe, Veronica Brown and Ed Osmond)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)

By Rajesh Kumar Singh and Doyinsola Oladipo CHICAGO/NEW YORK (Reuters) -Spirit Airlines' financial troubles reveal that going upscale is not a panacea for the challenges facing low-cost carriers, which are grappling with mounting operating costs, changing customer preferences and stiff competition from the Big Three U.S. airlines. After emerging from bankruptcy protection in March, Spirit tried to rebrand itself and focus on more affluent travelers to turn its business around. But within six months, the Florida-based airline filed for bankruptcy again, underscoring the limits of a strategy that is being replicated across the low-cost sector with similarly mixed results. A post-pandemic runup in wages, aircraft lease costs and other operating expenses has eroded the cost advantage that low-cost airlines once relied on. At the same time, inflation has hit their core customer base harder, while the Big Three – Delta, United, and American – have deployed larger aircraft and expanded basic economy offerings to compete directly for price-sensitive travelers. The result is a squeeze from both ends: rising costs and shrinking market share. MARGINS UNDER PRESSURE Spirit's strategic shift was aimed at tapping in to rising demand for premium travel and building a high-margin revenue stream to offset rising costs. Frontier Airlines, its closest peer, has followed suit by adding first-class-style seating and expanding loyalty perks. Breeze Airways, founded by JetBlue veteran David Neeleman, also offers bundled amenities and larger seats at lower prices than legacy carriers. But Spirit's quarterly revenue fell 20% amid a sharp drop in passenger volume, while non-fuel operating costs surged. The airline posted a $246 million loss in the June quarter. Frontier lost $70 million. Spirit's operating expenses in the June quarter totaled 118% of revenue, up from 84% in 2019. Frontier's expenses hit 108%, a 24-percentage-point jump from before the pandemic. Full-service carriers are also facing cost pressures, but their diversified revenue streams have helped shield margins and outperform the broader industry. Neeleman, CEO of Breeze Airways, attributed the troubles at budget airlines to a direct competition with the legacy airlines. In an interview, he said smaller carriers like Breeze and Allegiant have been making money as they mostly operate on nonstop routes with no competition.          BIG THREE MUSCLE IN Delta, United and American have used higher-capacity aircraft on domestic routes to compete more effectively for budget-conscious travelers. Their basic economy fares, once seen as a niche offering, now account for a growing share of ticket sales. United's basic economy made up 15% of domestic sales last year, up 2 points from 2023. Its chief commercial officer, Andrew Nocella, has called the basic economy offering a "home run" for the airline.  "The proliferation of basic economy was the thing that really hurt," Neeleman told Reuters. At a congressional hearing last month, Frontier CEO Barry Biffle accused legacy carriers of using loyalty programs to subsidize basic economy fares and urged lawmakers to remove barriers that prevent budget airlines from competing on equal footing. "Too many gates are locked, and too many doors are closed," he said. PREMIUM PIVOT RUINS LOW-COST SIMPLICITY Spirit's tiered fare model now includes priority boarding, complimentary snacks and drinks, streaming Wi-Fi, and free checked bags – features once unthinkable for a carrier known for bare-bones service. Frontier has similarly upgraded its offerings and streamlined customer service. But analysts say the shift adds operational complexity and dilutes the simplicity that made low-cost carriers viable. Their premium offerings also pale in comparison with those of legacy airlines. "Have you seen anywhere an example of an airline that has sought to reposition itself up in the value chain and succeeded in surviving?" said John Grant, senior analyst at travel consultancy OAG. Spirit and Frontier declined requests for interviews for this story.  BRAND PERCEPTION STILL A DRAG Discount airlines also face a complex branding challenge when courting high-value travelers as they have built a reputation for "nickel-and-diming" customers. Spirit and Frontier ranked last in J.D. Power's customer satisfaction survey this year. A U.S. Senate report found both the airlines paid $26 million in incentives to staff between 2022 and 2023 to enforce bag policies. "The only reason why people are buying them is because they're basically coupon-clipping," said Michael Taylor, senior managing director at J.D. Power. Both carriers have taken steps to soften their image. Spirit and Frontier have eliminated standard change and cancellation fees on many fares. Frontier has extended flight credit validity, streamlined boarding, and reinstated live phone support for elite loyalty members. Still, some travelers remain unconvinced. Lesly Simmons, a San Francisco-based tech marketing professional, said she paid twice for a checked bag on a Frontier flight and never received a refund. "I couldn't imagine why I would turn away from an established airline that has treated me quite well over the years to an airline that hasn't," said Simmons, who frequently flies with United. (Reporting by Rajesh Kumar Singh in Chicago and Doyinsola Oladipo in New York; Editing by Joe Brock and Matthew Lewis)

(The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)