(Jan 26): Gold smashed through the US$5,100 ($6,475.62)-an-ounce threshold for the first time, extending a breakneck rally fuelled by US President Donald Trump’s reshaping of international relations and investor flight from sovereign bonds and currencies.
Bullion jumped as much as 2.5% to more than US$5,111 on Monday, as dollar weakness reinforced demand. A gauge of the greenback has fallen almost 2% in six sessions, with speculation that the US may assist Japan in efforts to boost the yen adding to worries over Federal Reserve (Fed) independence and Trump’s erratic policy making. Silver also spiked to a record above US$110 an ounce.
Gold’s dramatic gains drive home bullion’s historic role as a gauge of fear in markets. Fresh from its best annual performance since 1979, it’s up about 18% so far this year due largely to the so-called debasement trade, whereby investors retreat from currencies and Treasuries. A massive sell-off in the Japanese bond market last week is the latest example of investors rejecting heavy fiscal spending.
In recent weeks, the Trump administration’s actions — attacks on the Fed, threats to annex Greenland, military intervention in Venezuela — have also spooked markets.
“Gold is the inverse of confidence,” said Max Belmont, a portfolio manager at First Eagle Investment Management, which holds billions of dollars worth of bullion. “It’s a hedge against unexpected bouts of inflation, unanticipated drawdowns in the market, flare-ups in geopolitical risk.”
See also: Gold smashes beyond US$5,100 as global upheaval fans demand frenzy
Swelling public debt in advanced economies has become another key pillar of gold’s rally. Some long-term investors, convinced that inflation will become the only path to state solvency, have piled into gold as a way to preserve purchasing power.
“People have become a lot more worried about the long-term debt trajectory over the past three years,” said John Reade, the chief strategist of the World Gold Council. “The place that I have found the debasement and debt arguments come through the most has been with family offices. They are thinking about generational wealth protection, rather than the short term.”
Still, bullion’s gains have been rapid enough to give some investors pause for thought. A majority of fund managers thought gold was the most crowded trade in a Bank of America Corp survey conducted before escalations over Greenland earlier this month. Some 45% of respondents thought gold was overvalued, tying with May 2025 as the highest share on record.
See also: Gold extends powerful rally as crisis over Greenland worsens
Silver has seen an even more rapid advance, supported by strong investment demand, including from retail buyers from Shanghai to Istanbul.
This debasement trade reached its zenith in late 2025, when prominent investors like Citadel’s chief executive officer Ken Griffin and Bridgewater Associates founder Ray Dalio pointed to gold’s rise as a warning signal.
Investors are now waiting for Trump’s pick for the next Fed chair after the US president said he has finished interviewing candidates, reiterating that he has someone in mind for the job. A more dovish chair would increase bets on further interest-rate cuts this year — a positive for non-yielding bullion — after three successive reductions.
The central bank purchases that helped to drive gold’s gains also look set to continue. Goldman Sachs Group Inc expects buying of about 60 tons a month this year, an amount of metal worth almost US$10 billion at current market prices. Much of those purchases are undeclared, and do not appear in economic data.
Poland’s central bank, the world’s biggest reported buyer, recently approved plans to purchase another 150 tons. That’s more than the entire holdings of large economies such as Mexico or Brazil.
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“Our primary goal is to build an appropriate portfolio for these unstable geopolitical times, one that will guarantee Poland stability, security, and credibility,” management board member Artur Sobon told Bloomberg News. “The price is not a primary consideration for us.”
Gold’s appeal is also showing up in speculator positioning data, while options traders are bracing for more upside in a red-hot market where few wish to stand against the wave. The one-month risk reversal, a gauge of sentiment and positioning, spiked to the highest level since April 2024.
“While risk reversals typically turn positive during strong gold rallies, the current move stands out for its size and persistence,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. This shows that the options market is “positioning for more than just a short-term price jump, consistent with gold carrying a geopolitical and confidence premium”, he said.
Gold had risen 2% to US$5,087.99 an ounce as of 11.15am in London on Monday. Silver advanced 5.8% to US$109.16. Platinum climbed to a record, and palladium also rose. The Bloomberg Dollar Spot Index was down 0.4%, after losing 1.6% last week.
Uploaded by Tham Yek Lee
