Gold smashed through the $3,500 mark yesterday as investors scrambled for safe havens amid mounting political and economic turmoil. The precious metal has jumped by more than 30% this year and doubled in value over the past three years, making it one of the best-performing assets anywhere in the world.
Silver has also soared, breaking through $40 an ounce for the first time since 2011.One factor driving the rush is that unlike shares or property, investing in gold is particularly attractive to British investors because there is no capital gains tax charged on profits.
Analysts said the surge reflects a toxic mix of global instability, expectations of imminent US interest rate cuts and fears about political interference in the Federal Reserve.
Bullion for immediate delivery hit $3,508 an ounce in Asian trading on Tuesday, surpassing its previous April peak, before slipping back slightly.
“Investors adding to gold allocations, especially as Fed rate cuts loom, are pushing prices higher,” said UBS strategist Joni Teves. “Our base case is that gold continues to make new highs over the coming quarters.
“A lower interest rate environment, softer economic data and continued elevated macro uncertainty and geopolitical risks boost gold’s role as a portfolio diversifier.”
David Wilson, director of commodities strategy at BNP Paribas, said: “Everything’s coming together to provide the perfect situation for higher gold. Growing levels of economic uncertainty is quite clearly making gold more appealing.”
Daniel Hynes, senior commodity strategist at ANZ, added: “Lower borrowing costs at the risk of fanning inflation is really perking up investor interest at the moment. It will underpin that upward momentum.”
Silver’s surge has been even sharper, climbing more than 40% this year alone. It is benefiting not only from safe-haven buying but also strong industrial demand for solar panels and electric vehicles.
Prem Raja, Head of Trading Floor at Currencies 4 You, described silver breaking the $40 barrier as “a massive moment for those that follow the metal”, while warning of heightened volatility.
Scott Gallacher, director at Rowley Turton, told Newspage: “Silver’s recent rally is being fuelled in part by gold’s record-breaking run – investors are now looking for the ‘next one’.
“Historically, it lags gold before surging, so some see this as silver’s time to shine. That said, anyone buying in now should be cautious. You may be arriving late to the party.”
Central banks have also been big buyers, with China, India, Turkey and Poland among the heaviest accumulators last year, helping to drive prices skywards. Markets are now braced for a pivotal US jobs report this week and a ruling on Donald Trump’s attempt to remove Fed governor Lisa Cook – both potential flashpoints for further turbulence.
With the dollar weakening and inflation risks rising, many analysts believe gold could test $4,000 an ounce in the months ahead.
