Gold Breaks Above $5,000 as Investors Seek Shelter Amid Geopolitical Chaos

Gold surged past the $5,000 per ounce threshold and continued to climb, extending its rapid rally, driven by the restructuring of international relations under U.S. President Donald Trump and a growing investor exodus from government bonds and currencies.

The metal gained as much as 2.5%, rising above $5,111 per ounce on Monday, with dollar weakness boosting demand. The greenback index has fallen nearly 2% over six sessions, as speculation that the U.S. may support Japan’s efforts to strengthen the yen has added to concerns about the Federal Reserve’s independence and the unpredictability of Trump’s policies. Silver also jumped to a record above $110 per ounce, extending gains for a third consecutive day.

Gold’s dramatic rise—now more than double its price over the past two years—underscores its historic role as a barometer of market fear. After posting its best annual performance since 1979, gold has risen nearly 18% year-to-date, driven largely by the so-called “debasement trade,” as investors move away from currencies and sovereign bonds. Last week’s massive selloff in the Japanese government bond market was the latest example of investors rejecting heavy fiscal spending.

Even as the metal clears a key psychological level, options traders are bracing for further gains in a “hot” market where few are willing to stand against the trend. The one-month risk reversal, a gauge of sentiment and positioning, climbed to its highest level since April 2024.

“While risk reversals typically turn positive during strong gold rallies, the current move stands out for its size and persistence,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp Ltd. This suggests that the options market is positioning for more than just a short-term price increase, consistent with the fact that gold is carrying a geopolitical and confidence premium, he added.

In recent weeks, actions by the Trump administration—attacks on the Federal Reserve, threats to annex Greenland, and military intervention in Venezuela—have also rattled markets. For investors navigating this uncertainty, gold’s appeal as a safe haven has rarely been stronger.

Over the weekend, Trump also threatened Canada with 100% tariffs on all exports to the U.S. if Ottawa signs a trade deal with China, escalating bilateral tensions. Meanwhile, political uncertainty in the U.S. remains elevated, as Democratic Senator Chuck Schumer vowed to block a massive spending package unless Republicans remove funding for the Department of Homeland Security—raising the risk of a partial government shutdown.

“Gold is the inverse of confidence,” said Max Belmont, a portfolio manager at First Eagle Investment Management. “It is a hedge against unexpected inflation shocks, unforeseen market downturns, and eruptions of geopolitical risk.”

Rising public-sector debt across advanced economies has become another key pillar of gold’s rally. Some long-term investors, convinced that inflation will become the only path to fiscal sustainability, have turned to gold as a way to preserve purchasing power.

“People have become much more concerned about the long-term debt trajectory over the past three years,” said John Reade, chief market strategist at the World Gold Council. “Where the debasement and debt argument resonates most strongly is with family offices. They are thinking about protecting wealth across generations, not short-term gains.”

This “debasement trade” peaked in late 2025, when prominent investors such as Citadel CEO Ken Griffin and Bridgewater Associates founder Ray Dalio pointed to gold’s rise as a warning signal.

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Investors are now awaiting Trump’s choice for the next Federal Reserve Chair, after the president said he has finished interviewing candidates and reiterated that he has a specific person in mind. A more dovish chair would raise the stakes for further rate cuts this year—positive for non-yielding gold—following three consecutive reductions.

Gold’s appeal is also evident in positioning data. Hedge funds and other large speculators increased their net long positions in the metal to the highest level in 16 weeks as of the week ending January 20, according to U.S. government data.

Meanwhile, silver’s surge is being supported by strong investment demand, including from retail investors from Shanghai to Istanbul. At the same time, investors are awaiting clarity on potential U.S. trade tariffs.