Gold has extended its meteoric rise against the backdrop of U.S. President Donald Trump's reshaping of international relations and investors fleeing sovereign bonds and currencies, with its price breaking through the $5,000 per ounce milestone for the first time.
A weakening U.S. dollar has bolstered safe-haven demand, pushing gold prices up by 2.5% at one point on Monday to exceed $5,111.07 per ounce. An index tracking the dollar's performance fell 2% over six trading sessions, fueled by rumors that the U.S. might assist Japan in boosting the yen, compounded by market concerns over the Federal Reserve's independence and the unpredictability of Trump's policies.
Silver prices surged nearly 12%, reaching a record high of over $110 per ounce, marking their largest intraday gain since 2008.
Gold's explosive surge reaffirms its traditional role as a market fear gauge. Having just recorded its best annual performance since 1979, the precious metal has climbed approximately 18% year-to-date. This rally is largely attributed to the so-called devaluation trade, where investors dump currencies and U.S. Treasury bonds. The massive sell-off in the Japanese government bond market last week is the latest example of investors rebelling against large-scale fiscal spending.
In recent weeks, a series of actions by the Trump administration—including criticizing the Federal Reserve, threatening to annex Greenland, and suggesting military intervention in Venezuela—have triggered market alarm.
"Gold is an inverse indicator of confidence," said Max Belmont, a portfolio manager at First Eagle Investment Management. "It serves as a hedge against sudden inflation, unexpected market crashes, and escalating geopolitical risks." The firm holds billions of dollars in gold.
The ballooning public debt of developed economies provides another crucial pillar supporting the sharp rise in gold prices. Some long-term investors are convinced that inflation will be the only way for governments to maintain solvency, leading them to buy gold as a store of value.
Platinum prices also hit a new high, while palladium advanced. The Bloomberg Dollar Spot Index, which fell 1.6% last week, declined a further 0.5%.
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