Over the past two years, gold has more than doubled in price. This is linked to the so-called "devaluation trading," where investors begin to avoid currencies and treasury bonds. Since the beginning of the year, the price of gold has risen by more than 17%. The recent sell-off in the Japanese bond market last week was yet another indication of how investors are turning away from large government expenditures.
The recent price increase was about 2%, and the cost of gold exceeded $5085, occurring against the backdrop of a weakening dollar and increased demand. The index of the American currency has fallen by almost 2% over the past six trading sessions, and rumors about potential U.S. assistance to Japan in strengthening the yen raise concerns about the independence of the Federal Reserve and Trump's unstable policies.
The rise in precious metal prices is also associated with active purchases by central banks and a growing interest in them as safe assets.
Silver showed a growth of more than 5%, reaching a historic high of over $100 per ounce in the previous session, driven by high demand from retail buyers from Shanghai to Istanbul.
“Recent actions by the Trump administration, including criticism of the Fed, threats to annex Greenland, and military intervention in Venezuela, have raised concerns in the markets. For investors seeking a safe haven, gold has become the most attractive asset,” notes Bloomberg.
Last weekend, Trump threatened Canada with 100% tariffs on all exports to the U.S. if Ottawa signs a trade agreement with China, escalating tensions in bilateral relations. Political uncertainty in the U.S. also remains high, as Chuck Schumer, the Senate Democratic leader, has promised to block a major budget package if Republicans do not abandon funding for the Department of Homeland Security, increasing the risk of a partial government shutdown.
The rise in government debt in developed countries has also become an important factor contributing to the increase in gold prices. Some long-term investors, convinced that inflation will be a major obstacle to financial stability, are actively acquiring gold to preserve purchasing power.
“Many geopolitical uncertainties caused by Trump's actions are unlikely to be resolved in the near future,” comments Vasu Menon, managing director of investment strategy at Oversea-Chinese Banking Corp Ltd. This suggests that “gold may remain an interesting asset for investment over the coming months and even years, but investors should be prepared for periodic corrections after significant growth over the past year.”
