Gold prices have surged to new peaks, exceeding $US3500 an ounce, bolstered by expectations of Federal Reserve interest rate cuts and persistent global economic anxieties. A three-year bull run, propelled by substantial central bank acquisitions, has further intensified the metal’s appeal. This year alone, gold has outpaced global equities, the majority of commodities, and alternative assets like Bitcoin.
Donald Trump’s implementation of tariffs and his efforts to exert influence over Federal Reserve policy have contributed to this surge. These actions have weakened the US dollar and lowered short-term Treasury yields, potentially aligning with the president’s objective of encouraging business and consumer spending while alleviating America’s debt repayment obligations.
According to Johan Jooste, CEO of Pangaea Wealth, the current policy volatility is exceptionally high, particularly stemming from the White House. He suggests that the administration’s policies appear to be either intentionally or unintentionally weakening the dollar, which is beneficial for gold.
Shaniel Ramjee, co-head of multi-asset at Pictet Asset Management in London, notes that the dollar will act as a release valve for the policies the administration seeks to enact. Gold serves as a hedge against a weaker currency or policies deliberately designed to weaken the dollar, Ramjee added. Pictet Asset Management is an investment firm managing assets across various investment strategies.
