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Shkruar nga PamfletiThe precious metal will continue to be in high demand as a source of diversification and security as long as uncertainty reigns in global financial markets.
The price of gold has risen above US$5,000 an ounce for the first time as Donald Trump's chaotic policies and statements push more investors to seek safe haven in the precious metal.
The price of the yellow metal rose 1.8% to $5,078 an ounce on Monday, according to Bloomberg.
The historic moment came as Trump threatened Canada with 100% tariffs if America's northern neighbor "makes a deal with China," and following the US president's dramatic showdown with Europe over the future of Greenland.
With global financial markets already in turmoil, there are also growing fears of another US shutdown after Democrats threatened to cut funding for the Department of Homeland Security following the weekend shooting of a man in Minneapolis by federal immigration agents. Monday's rally is the latest in a remarkable and historic run for gold that has seen its price rise by nearly 90% since Trump's inauguration a little over a year ago.
Steve Miller, an investment strategy advisor at GSFM, an Australia-based asset manager, said he had not seen anything like this in his four decades working in financial markets.
"The second oil shock and the inflation fears in the late '70s, early '80s would be the last time I remember gold doing that and that was before my time in the markets," he said.
Miller, a former head of fixed income at investment giant BlackRock, said gold's recent rally came on the heels of growing concerns that the Trump administration would take steps to weaken the world's most important currency, the U.S. dollar.
The catalyst for Monday's rise was also news that the US Federal Reserve was calling on banks to control the exchange rate between the US dollar and the depreciating Japanese yen.
"If the Federal Reserve is doing this on behalf of the U.S. Treasury, they are doing it for one reason only: they think the U.S. dollar is too high," Miller said.
Key voices within the US administration have long signaled that they would like a weaker US dollar to help revitalize America's domestic manufacturing base.
A weaker dollar would undermine the value of key US assets, such as Treasury bonds, which have shone a light on gold's allure as the ultimate store of value.
This "devaluation trade" also has a more dramatic nuance.
Some have pointed to the U.S.'s endless debt and deficits, which could cause a more dramatic shock to global financial markets if investors suddenly lose confidence in the world's reserve currency.
Miller was not convinced that this more dramatic vision would come to fruition.
However, the precious metal will remain in high demand as a source of diversification and security as long as uncertainty reigns in global financial markets.
"I think there could be some further upside," Miller said. "But, as good as it is, it can protect you from turmoil in other asset classes."
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