Market News

BY  Patrick Commins

Gold has jumped above $5,000 an ounce for the first time, as Donald Trump’s chaotic policies and proclamations drive more investors to seek safe harbour in the precious metal.

The price of the yellow metal reached a record high of $5,100 on Monday morning, before easing back to settle up 2.2% at $5,089.

The historic moment came as Trump threatened Canada with 100% tariffs if America’s northern neighbour “makes a deal with China”, and after the US president’s dramatic showdown with Europe over the future of Greenland.

With global financial markets already jittery, there are also rising fears of another US shutdown after Democrats threatened funding for the Department of Homeland Security in the wake of the weekend shooting of a man in Minneapolis by federal immigration agents.

Monday’s milestone is the latest in an extraordinary and historic run for gold that has seen its price jump by nearly 90% since Trump’s inauguration a little over a year ago.

Steve Miller, an investment strategy adviser at GSFM, an Australia-based asset manager, said he hadn’t seen anything like it in his four decades working in financial markets.

“The second oil shock and the inflation scare in the late ’70s, early ’80s would be the last time I remember when gold did this – and that was before my time in markets,” he said.

Miller, a former head of fixed income at investment giant BlackRock, said the latest lift in gold came on rising concerns that Trump’s administration would take steps to weaken the world’s most important currency, the US dollar.

The catalyst from Monday’s increase was also news that the US Federal Reserve was calling banks to check the rate of exchange between the US dollar and a depreciating Japanese yen.

“If the Federal Reserve is doing this on behalf of the US Treasury, they’re only doing it for one reason: they think the US dollar is too high,” Miller said.

A weaker dollar would undermine the value of American mainstay assets such as treasury bonds, which has burnished gold’s allure as the ultimate store of value.

This “debasement trade” also has a more dramatic undertone.

Some have pointed to the US’s runaway debt and deficits, which could deliver a more dramatic blow to global financial markets if investors suddenly lose faith in the world’s reserve currency.

Millerwas not convinced this more dramatic vision would come to pass.

Nonetheless, the precious metal will remain in high demand as a source of diversification and safety for as long as uncertainty reigns in global financial markets.

“I think it could well have some further upside,” Miller said. “But just as good is it might insulate you from turmoil in other asset classes.”