Gold Above $5,000: Investors Seek Safe Haven Outside the Dollar

Gold is rising and remains above $5,000 per ounce for the second consecutive day, supported by increasing geopolitical risks and an outflow of investors from government bonds and currencies, which extends the upward momentum in precious metals.

The price of gold increased by up to 1.9% on Tuesday, marking the seventh consecutive day of gains. Silver saw even sharper moves, rising more than 9% before partially retracing during U.S. trading. A strong wave of investment demand has pushed precious metals sharply higher this month, with silver now approximately 50% more expensive than at the beginning of January. Gold and platinum have also recorded significant gains.

In recent weeks, a return of so-called “depreciation trades” has been observed, in which investors pull back from currencies and U.S. government bonds. The massive sell-off in the Japanese bond market is another signal of concerns over aggressive fiscal spending. At the same time, speculation that the U.S. might intervene to support the yen is putting pressure on the dollar, making gold and other metals more accessible to most buyers.

Additional market tension is being fueled by actions from the Trump administration, including threats to annex Greenland, military intervention in Venezuela, and renewed attacks on the independence of the Federal Reserve.

The U.S. president has also threatened to raise tariffs on goods from South Korea, citing the local parliament’s failure to ratify a trade agreement. This warning follows the weekend threat to impose a 100% tariff on Canada if Ottawa signs a trade deal with China.

The growing isolation of the U.S. from the rest of the world is prompting many investors to reduce their exposure to dollar-denominated assets and shift funds into gold, according to Europe’s largest asset manager, Amundi. Vincent Mortier, the company’s Chief Investment Officer, notes that gold remains an excellent long-term hedge against depreciation and an effective means of preserving purchasing power.

Heightened demand is also evident in market positioning. Options traders are preparing for further gains in a market where few are willing to bet against the upward trend. Expected volatility in Comex gold futures is reaching its highest levels since the pandemic peak in March 2020, while volatility in the largest gold-backed exchange-traded fund is also rising sharply.

Analysts at Deutsche Bank note that the continued rise in gold reflects persistent investment motives, such as increasing currency reserves and larger positions in non-dollar and real assets. The bank has raised its gold price forecast to $6,000 per ounce by the end of the year.

Silver is heading toward a historic high above $117.71, reached in the previous session when it recorded its largest single-day gain since the 2008 financial crisis. The rally is supported by strong physical demand and speculative interest in a market with limited liquidity, with indications that Chinese buyers are playing a leading role.

The sharp volatility in silver has led to record trading volumes in the largest silver ETF, where turnover reached nearly $40 billion in a single day. This level is comparable to trading in the S&P 500 ETF and exceeds the trading volumes of stocks such as Nvidia and Tesla. Only a few months ago, daily trading in the silver fund was around $2 billion.

The metals market at CME Group recorded a new single-day record of approximately 3.34 million contracts, an 18% increase from the previous high.

In early afternoon trading in New York, gold rose about 1.5% to $5,085 per ounce, silver increased nearly 4% to $107.6, while platinum and palladium declined. Meanwhile, the Bloomberg dollar index fell about 0.7%, further supporting precious metal prices.

-Source: Bloomberg Terminal