Gold climbs to record high after slide in dollar

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Gold has raced to a record high as geopolitical tensions and a weakening dollar extended the precious metal’s gains this year to more than 20 per cent.

The price of gold climbed more than 2 per cent on Wednesday, breaking through $5,300 per troy ounce. The move follows a 3.4 per cent surge on Tuesday.

Gold has now gained more than 22 per cent this year amid investor concern over US policymaking and a sharp sell-off in the US dollar.

Investor demand has also risen due to growing discomfort with traditional haven assets such as developed markets’ government bonds.

“For the time being there is no other safe and liquid traditional asset that is priced in [US dollars] except for gold,” said Karsten Junius, chief economist at Swiss bank Safra Sarasin.

Ben Wiltshire, a G10 rates trading strategist at Citi, said that gold had “taken the crown” from fixed income sovereign debt as the “knee jerk” trade for investors seeking safety.

“This is part of a structural shift where bonds don’t rally in risk-off,” Wiltshire said.

A weakening US currency has further fuelled the rally in gold by making the metal, which is priced in dollars, cheaper for investors holding foreign currencies.

The dollar has fallen 1.5 per cent against a basket of other major currencies this week, with the sell-off accelerating on Tuesday after US President Donald Trump said he was not concerned by its steep decline.

The dollar stabilised on Wednesday, edging up 0.2 per cent against a basket of other major currencies.

The rally in gold prices was initially triggered by increased demand from central banks following the move to freeze Russia’s foreign exchange reserves in the wake of its full-scale invasion of Ukraine in 2022.

The expansionary fiscal plans of developed economies have also led some investors to worry governments will “debase” their currencies in order to fund spending.

Growing demand from private investors seeking to increase their exposure to gold via exchange traded funds and physical purchases of bullion has further added to the rally.