Quick overview

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Gold saw its first surge above $5,000 per ounce. As the weakening dollar bolstered demand because of investor flight from sovereign bonds and currencies and US President Donald Trump’s reshaping of international relations, bullion surged as much as 2.1 percent to almost $5,100.

 

The value of the US dollar has dropped by nearly 2% in just 6 sessions, and concerns about Trump’s unpredictable policy and the Federal Reserve’s independence have been exacerbated by rumors that the US may help Japan strengthen the yen. Additionally, silver increased for a third day, reaching a record above $109 per ounce.

The sharp rise in gold prices, which has more than doubled in the past two years, highlights bullion’s longstanding function as a gauge of market anxiety.

It has risen more than 17% so far this year, following its best annual performance since 1979. This is mostly because of the so-called debasement trade, in which investors pull away from Treasuries and currencies.

Tensions between the two countries increased over the weekend when Trump threatened to impose 100% tariffs on all Canadian exports to the US if Ottawa reached a trade agreement with China. Chuck Schumer, the Senate Democratic leader, has vowed to block a massive spending package unless Republicans cut funding for the Department of Homeland Security, raising the possibility of a partial government shutdown. Meanwhile, political uncertainties in the US remain high.

Growing public debt in developed nations is now another important factor supporting the gold rally. Some long-term investors have hoarded gold to maintain purchasing power because they believe that inflation will be the only route to state solvency. According to John Reade, chief strategist at the World Gold Council, “people have become much more worried about the long-term debt trajectory over the past three years.” Family offices are where I have seen the most instances of debasement and debt disputes.