Quick overview

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A weak US dollar continued a fierce rally driven by geopolitical concerns and investor flight from sovereign bonds and currencies, and gold rose, staying above $5,000 an ounce for a second day. Bullion saw its eighth consecutive day of gains on Wednesday.

President Donald Trump threatened to increase tariffs on South Korean goods, and a crucial dollar indicator fell on Monday due to growing rumors that the US might assist Japan in supporting the yen, which would lower the cost of precious metals for consumers.

Silver increased by over 7%. The sharp increase in gold, which has more than doubled over the past two years, underscores bullion’s longstanding role as a gauge of market anxiety.

It has gained an additional 17% so far this year, following its best yearly performance since 1979, mostly due to the so-called debasement trade, in which investors withdraw from Treasuries and currencies.

The most recent instance of investors rejecting high fiscal policy is a significant selloff in the Japanese bond market.

According to Amundi SA, the biggest money manager in Europe, many investors are being persuaded to reduce their holdings of dollar assets and convert to gold due to America’s growing isolation from other countries. In an interview with Bloomberg Television, Vincent Mortier, Amundi’s chief investment officer, stated that gold is “a very good protection against debasement and a good way to maintain some purchasing power.”

Speculator positioning data is demonstrating the appeal of gold, and options traders are anticipating further gains in a volatile market where few want to resist the trend. Comex futures’ implied volatility reached its highest level since the Covid-19 pandemic’s peak in March 2020, and State Street’s SPDR Gold Shares, the biggest bullion-backed exchange-traded fund in the world, also saw an increase in volatility.