Gold Holds at $5,000 an Ounce for the Second Day

SadaNews - Gold prices have risen, maintaining trading above the $5,000 per ounce level for the second day, with the weakness of the dollar contributing to the extension of a rally fueled by geopolitical risks and a retreat of investors from sovereign bonds and currencies.

The precious metal jumped by up to 1.4% on Tuesday, marking its seventh consecutive day of gains. U.S. President Donald Trump threatened to raise tariffs on South Korean goods, while the dollar fell to its lowest level in nearly four years amid increasing speculation that the U.S. may assist Japan in supporting the yen, making precious metals cheaper for most buyers. Silver rose by nearly 7%.

Declining Confidence in Traditional Assets

The sharp surge in gold prices, which have more than doubled over the past two years, reaffirms its historical role as a gauge of fear in the markets.

After recording its best annual performance since 1979, gold has risen by about 17% additional since the beginning of this year, largely driven by what is known as "currency devaluation trade," as investors retreat from currencies and treasury bonds. The massive sell-off in the Japanese bond market is the latest example of investors rejecting heavy financial spending.

In recent weeks, actions taken by the Trump administration, from challenging the independence of the Federal Reserve to threatening to annex Greenland and military intervention in Venezuela, have shaken the markets. The U.S. President's warning to South Korea followed his threat to Canada earlier in the week with a 100% tariff if Ottawa strikes a trade deal with China.

Options Bets and Fed Decision Anticipation

Options traders are betting on the continued rise of gold, as investors diversify away from U.S. assets. Implied volatility of gold futures on the COMEX has risen to its highest level since the peak of the COVID-19 pandemic in March 2020, while volatility in the SPDR Gold Shares ETF, the world's largest gold-backed ETF, also saw a similar upward breakout.

Fouad Razaq Zadah, an analyst at Cit Index, stated: "Traders are buying on dips instead of selling on highs. As long as this mentality continues, it’s hard to argue against price increases in the near term, even if there is a temporary disconnection between fundamentals and reality."

Looking ahead, investors are also awaiting moves from the Federal Reserve on Wednesday, with widespread expectations that the U.S. central bank will halt its interest rate-cutting cycle, with labor markets stabilizing and some degree of consensus returning within the bank after months of increasing division.

Gold rose by 1.2% to $5,067.84 an ounce by 1:00 PM in Singapore. Silver increased by 4.3% to $108.25 an ounce, after hitting a record level above $117.71 in the previous session before retreating.

Both platinum and palladium also rose, while the Bloomberg dollar spot index climbed 0.1%, having declined 0.4% in the previous session.