Gold extends gains above $5,000 as debasement trade gathers pace

Bullion jumped as much as 1.1% early on Tuesday, its seventh straight day of gains.

• Gold stays above $5,000/oz, rally continues due to weak dollar and market fears
• Bullion gains for seventh straight day as investors flee bonds and currencies
• Options traders bet gold will rise further; silver hits record before retreating

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Gold rose, holding above $5,000 an ounce for a second day, as a weak dollar helped to extend a rally fueled by geopolitical risks and investor flight from sovereign bonds and currencies.

Bullion jumped as much as 1.1% early on Tuesday, its seventh straight day of gains. A gauge of the dollar fell to the lowest in nearly four years during the previous session, making gold more affordable for most buyers, while US President Donald Trump threatened to hike tariffs on South Korean goods to 25%.

Gold’s dramatic rally – the metal has more than doubled over the last two years – drives home bullion’s historic role as a gauge of fear in markets. Fresh from its best annual performance since 1979, it’s gained a further 17% so far this year due largely to the so-called debasement trade, whereby investors retreat from currencies and Treasuries. A massive selloff in the Japanese bond market is the latest example of investors rejecting heavy fiscal spending.

In recent weeks, the Trump administration’s actions — attacks on the independence of the Federal Reserve, threats to annex Greenland, military intervention in Venezuela — have also shaken markets. The US leader’s warning to South Korea follows a threat to Canada over the weekend to impose 100% tariffs if Ottawa makes a trade deal with China.

Options traders are betting gold will rally further as investors diversify from American assets. Implied volatility of Comex gold futures climbed to the highest since the peak of the Covid-19 pandemic in March 2020, while volatility on State Street’s SPDR Gold Shares — the world’s largest gold-backed exchange-traded fund — has also broken out higher.

Looking ahead, investors will also be keeping a close tab on the Federal Reserve’s actions on Wednesday, with the US central bank widely expected to halt its rate-cutting cycle as a steadier jobs market restores a degree of consensus after months of growing division.

Gold rose 0.9% to $5,051.50 an ounce as of 8:15 a.m. in Singapore. Silver advanced 3.6% to $107.49 an ounce, having hit an all-time high above $117.71 in the previous session before retreating. Platinum and palladium climbed, while the Bloomberg Dollar Spot Index was flat after falling 0.4% in the previous session.