Gold Hits Record Above $5,300 as Trump Dollar Comments Aid Rally

Gold surged to a record high above $5,300 an ounce, extending a breakneck rally fueled by US dollar weakness and a flight from sovereign bonds and currencies.

Bullion rose as much as 2.5%, building on a 3.4% jump on Tuesday — its biggest one-day gain since April. President Donald Trump said he was not concerned about a drop in the value of the dollar that has dragged the world's premier reserve currency to its weakest level in nearly four years.

That decline, combined with heightened geopolitical risks and investor flight from currencies and Treasuries, has sparked a wave of investment demand in precious metals. Gold has gained around 22% already this year, smashing through $5,000 an ounce for the first time this week. Over the same period, silver has surged almost 60%.

A massive selloff in the Japanese bond market is the latest example of concerns over heavy fiscal spending, while speculation the US may intervene to support the yen has weighed on the dollar, making precious metals cheaper for most buyers. 

Trump told reporters in Iowa on Tuesday that the dollar was “doing great” and he expected currency values to fluctuate. “No, I think it's great,” he told reporters when asked if he was worried about losses in the currency. A gauge of the US currency fell 1.1% on Tuesday, its biggest one-day drop since April.

Photo Credit: Bloomberg

The Trump administration's actions — threats to annex Greenland and military intervention in Venezuela, as well as renewed attacks on the Federal Reserve's independence — have also unsettled markets in recent weeks. The US leader has pledged to hike tariffs on South Korean goods and to impose 100% levies on Canada if Ottawa reaches a trade deal with China.

Meanwhile, bond traders are ramping up bets on a dovish policy shift at the Fed on the expectations that BlackRock Inc. Chief Investment Officer Rick Rieder will succeed Jerome Powell as chair. The Wall Street veteran has advocated for an aggressive approach to lower borrowing costs. A lower rate environment benefits precious metals, which don't pay interest.

Expectations of a more dovish and less independent Fed, as well as geopolitical risks, “are likely driving more rapid allocations to gold, led by retail investors,” Suki Cooper, global head of commodities research at Standard Chartered Plc, said in a note. “Barring short-term corrections, we continue to see further upside risk.”

Massive Hoard

Even crypto giants have joined the rally: Tether Holdings SA is now the world's largest known hoard of bullion outside of banks and nation states, having become a major player in the global market over the past year. The company holds around 140 tons of gold, most of which are its own reserves, Chief Executive Officer Paolo Ardoino told Bloomberg News in an interview.

Silver rose as much as 3.6% to close in on a record high above $117 an ounce hit on Monday, after weeks of exceptional volatility, before paring gains. CME Group is raising margins on Comex silver futures from Wednesday's close, while China's only pure-play silver fund halted trading earlier in the day. The UBS SDIC Silver Futures Fund LOF also paused new subscriptions after repeated warnings that its current premium over Shanghai Futures Exchange silver contracts is “unsustainable.”

Against the backdrop of a breakneck rally in global prices, authorities in the southern Chinese city of Shenzhen set up a special task force to oversee the operations of a gold-trading platform, after investors faced difficulties withdrawing funds from their accounts, sparking protests.

Gold rose 1.6% to $5,265.14 an ounce as of 11:49 a.m. in London. Silver was little changed at $112.19 an ounce. Platinum steadied and palladium advanced. The Bloomberg Dollar Spot Index was up 0.3%.

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