Glory to gold: With yet another record, how high can it go?

Gold has surged to a fresh record high above $US5200 an ounce, extending a breakneck rally fuelled by US dollar weakness and a flight from sovereign bonds and currencies.

Bullion rose as much as 1.3 per cent on Wednesday, having jumped 3.4 per cent in the previous session — 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 more than 20 per cent since the beginning of the year, smashing through $US5000 an ounce for the first time this week. In the same period, silver has surged more than 50 per cent.

A massive sell-off 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. A gauge of the US currency fell 1.1 per cent 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.

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 per cent 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 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, said in a note. “Barring short-term corrections, we continue to see further upside risk.”

Gold’s rally has also been driven by elevated central-bank buying and inflows to bullion-backed exchange-traded funds. Its appeal is also showing up in positioning data, with options traders bracing for further gains in a market where few are willing to bet against the rally. Implied volatility on Comex futures climbed to the highest since the peak of the COVID-19 pandemic in March 2020.

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

Meanwhile, silver rose nearly 3 per cent to close in on a record high above $US117 an ounce hit on Monday. 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.”

Gold rose 1.1 per cent to $US5234.64 an ounce as of 12.15pm in Singapore. Silver climbed 2.5 per cent to $US114.92. Platinum and palladium advanced, while the Bloomberg Dollar Spot Index was up 0.3 per cent on Wednesday but down 1.3 per cent for the week.

Bloomberg