Gold price surges to $3,300 as trust in US bonds collapses
Gold prices have passed $3,300 for the first time in history as investors flee US government bonds, which were previously viewed as a safe haven.
“It seems that fewer countries are trusting the US — and therefore US Treasuries as a ‘safe haven’ asset class,” explained analysts from Invesco.
“This has resulted in greater buying of gold, which seems to have become the preferred ‘safe haven’ asset class of choice.”
US Treasury yields have jumped significantly since president Donald Trump rolled out his sweeping tariffs earlier this month, with US 30-year government bond yields spiking as high as five per cent.
This most recent rally for gold has come after the administration intensified its trade war against China, further driving investors away from US bonds.
“The recent erratic moves in US Treasuries, along with the persistent US dollar sell-off, have diminished the standing of both as obvious places in which to park funds during market disruptions,” added David Morrison, senior market analyst at Trade Nation.
“This means that gold has maintained, or even increased, its attractiveness for investors, despite trading at overbought levels.”
Gold prices have been on a record run since December, rising from $2,600 to break through the $3,000 barrier last month.
Last Thursday, gold’s price had its largest one-day gain since April 2020 as uncertainty over Trump’s tariffs caused investors to flock to the safe haven.
However, there are other factors behind gold’s recent rally, including strong demand from both institutions and retail investors.
“Increased central bank purchases and expectations of rate cuts by the Federal Reserve continue to act as tailwinds for gold,” added Daniela Sabin Hathorn, senior market analyst at Capital.com.
UBS recently upgraded its forecasts for central bank purchases this year from 950 metric tons to 1,000, citing central banks systematically raising gold’s share of total reserves.
However, Hathorn noted that technical indicators may be signalling an end to the record rally, with gold’s relative strength index failing to match its recent price peaks.
“If a pullback occurs, the $3,000 mark could reemerge as a critical support level, testing investor sentiment and appetite for a further decline,” she said.
Gold becomes most popular trade
For the first time in over a decade, Bank of America’s global fund manager survey found that buying gold was perceived as the most crowded trade this month.
The most popular trade since March 2023 has been the Magnificent Seven, but 49 per cent of investors now say gold is on top.
Gold also expected to be the best performing asset in 2025, 42 per cent of investors said, up from 23 per cent in March.
Last week, UBS forecast that gold will jump to $3,500 by June thanks to rising demand from central banks and ETFs, with even its downside target expecting the precious metal’s price to remain stable.
Meanwhile, Goldman Sachs analysts predicted that gold will rally to $3,700 by the end of this year, before reaching $4,000 in 2026.