Gold prices have surged in recent weeks, attracting investors seeking a safe haven as U.S. Treasuries and the dollar have experienced significant declines. The uptick in gold comes amid trade disruptions linked to the shifting U.S. trade policies under President Donald Trump, which have led to a reassessment of traditional safe-haven assets.
Vivek Dhar, Director of Mining and Energy Commodities Research at the Commonwealth Bank of Australia, explained that bullion has effectively “stepped into the void” left by the diminishing appeal of U.S. assets. “What makes this flight to safety particularly unique is that the U.S. dollar and Treasuries, which traditionally serve as safe havens, have been sold off as their appeal has waned,” Dhar stated.
As a result, gold has reached new heights, hitting $3,500 per ounce on Tuesday, with analysts forecasting further price hikes. J.P. Morgan predicts that gold will average $3,675 per ounce by the fourth quarter of 2025, potentially hitting $4,000 by mid-2026.
In contrast, U.S. Treasuries have faced a sell-off, with the 30-year yield reaching its highest level since November 2023. The U.S. dollar index has dropped by 8% this year, according to data from LSEG. Although Treasury yields have seen some recovery recently, the sell-off has already tarnished the reputation of U.S. assets among investors.
John Reade, Market Strategist at the World Gold Council, told CNBC, “Although this is far from a ‘Death of the U.S. Dollar’ scenario, it’s clear that confidence in U.S. assets, including the dollar and Treasuries, has been weakened.”
The Unprecedented Appeal of Gold
Gold’s recent rise highlights the breakdown of the traditional inverse relationship between Treasury yields and gold. Typically, when yields rise, gold becomes less attractive as it doesn’t generate interest income. However, several factors have fueled gold’s rise as a preferred asset, including its perceived role as a hedge against inflation.
Michael Ryan, a lecturer at the University of Waikato, noted that U.S. tariffs are expected to push inflation higher, which could lead to higher interest rates and further pressure U.S. Treasuries. “Gold, historically seen as an inflation hedge, is benefiting from these dynamics,” he explained.
Further complicating the situation is a growing skepticism about U.S. economic and geopolitical stability. Analysts argue that the traditional narrative of U.S. exceptionalism is losing its grip, contributing to a decline in trust in U.S. assets.
“There is a growing lack of confidence in U.S. assets due to economic and geopolitical uncertainties,” said Soni Kumari, Commodity Strategist at ANZ. The ongoing tariff war under President Trump is viewed by many as a policy misstep, further eroding faith in the U.S. dollar and Treasury securities.
Gold, by contrast, remains free from such political and economic pressures. Alexander Zumpfe, Senior Precious Metals Trader at Heraeus, emphasized that gold carries no credit risk and is not tied to the trajectory of any single nation’s economy or politics. This makes it especially appealing in times when confidence in traditional financial instruments is fragile.
The Dollar’s Decline and Global Diversification
The ongoing depreciation of the U.S. dollar has made gold more attractive, particularly for holders of other currencies. A weaker dollar boosts the appeal of dollar-priced commodities like gold, increasing their attractiveness on the global stage.
Emerging market central banks, which have traditionally held less gold compared to their developed counterparts, are also increasingly turning to the yellow metal. Eli Lee, Chief Investment Strategist at Bank of Singapore, said these central banks are diversifying their reserves away from the dollar, likely keeping gold as a strong investment option.
The dollar’s recent decline has sparked discussions about de-dollarization, with some speculating that gold could serve as an alternative global reserve currency. Dhar of Commonwealth Bank pointed out that some countries see gold as a hedge against the risk of U.S. sanctions or actions that could freeze foreign reserves for political reasons.
However, while gold’s attractiveness has grown, it remains unlikely to replace the U.S. dollar anytime soon. Dhar noted that the logistical challenges of storing and transporting gold, coupled with its lack of interest-bearing returns, make it an imperfect substitute.
Meanwhile, U.S. Treasuries, despite a recent revaluation of their safe-haven status, remain the most liquid and widely-traded assets in the world. Todd Brighton, Portfolio Manager at Franklin Income Investors, emphasized that it is still “really hard” to replace U.S. Treasuries as a global safe haven, particularly in a world transitioning to a more multipolar financial system.
In summary, while gold’s recent rise underscores its appeal as a safe haven, especially amid U.S. economic uncertainty, it is unlikely to overshadow U.S. assets as the dominant global reserve choice in the foreseeable future. The ongoing trade turmoil, however, has undoubtedly shifted investor sentiment, making gold a more attractive option for those seeking stability in uncertain times.
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