Gold steadied after seven days of gains, with traders digesting a record-breaking rally fueled by US dollar weakness and a flight from sovereign bonds and currencies. Bullion was near $5,160 an ounce, having risen 3.4% 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 nearly 20% since the beginning of the year, smashing through $5,000 an ounce for the first time this week before advancing to a record of $5,190.41. In the same period, silver has surged more than 50%.
A massive selloff in the Japanese bond market is the latest example of concerns over heavy fiscal spending, while speculation that the US may intervene to support the yen has weighed on the dollar, making precious metals cheaper for most buyers. A gauge of the US currency fell 1.1% on Tuesday, its biggest one-day drop since April.
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.
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 threatened to hike tariffs on South Korean goods and to impose 100% tariffs 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 expectation 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."
Gold edged down 0.4% to $5,161.36 an ounce as of 8:21 a.m. in Singapore. Silver rose 0.3% to $112.34. Platinum and palladium fell, while the Bloomberg Dollar Spot Index was up 0.2% on Wednesday but down 1.4% for the week.
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