Gold no longer stands still and soars above $5,100 an ounce

After its best annual performance since 1979, this year it rose by over 17%, largely due to the so-called devaluation trade, whereby investors withdraw from currencies and Treasury bonds.

Last week's massive sell-off of the Japanese bond market is the latest example of investors' refusal to take on huge tax expenditures.

In recent weeks, the Trump administration's actions - attacks on the Fed, threats to annex Greenland, military intervention in Venezuela - have also spooked markets. For investors trying to cope with this uncertainty,the heavenly allure of gold has rarely been more attractive.

"Gold is the inverse of confidence," said Max Belmont, portfolio manager at First Eagle Investment Management. "It is a hedge against unexpected bouts of inflation, unexpected market declines, flare-ups of geopolitical risk."

Over the weekend, Trump threatened Canada with 100% tariffs on all its exports to the US if Ottawa reached a trade agreement with China, increasing bilateral tensions.

Meanwhile, political uncertainties within the United States remain high, as Senate Democratic leader Chuck Schumer has promised to block a massive spending package unless Republicans eliminate funding for the Department of Homeland Security, thus increasing the risk of a partial government shutdown.

The rise of government debt in advanced economies has become another key pillar of gold's recovery. Some long-term investors, convinced that inflation will become the only path to government solvency, have turned to gold to preserve purchasing power.

"Over the past three years, people have become much more concerned about long-term debt trends," said John Reade, chief strategist at the World Gold Council. "The place where I have found the arguments about declining appeal and debt the most has been with family offices. They are thinking about generational wealth protection rather than short-termism."

This downward trend peaked in late 2025, when prominent investors such as Citadel CEO Ken Griffin and Bridgewater Associates founder Ray Dalio pointed to gold's rise as a warning signal.

Investors are now waiting for Trump's choice for the next Fed chairman after the US president said he had finished interviewing candidates, reiterating that he had someone in mind for the job.

A more accommodating president would increase bets on further interest rate cuts this year - a positive for non-yielding bullion - after three consecutive reductions.

"Many of the current Trump-induced geopolitical uncertainties are unlikely to disappear soon," said Vasu Menon, ad of investment strategy at Oversea-Chinese Banking Corp Ltd. This means that "gold could remain in play in the coming months and even years, although investors should prepare for intermittent pullbacks after the strong gains of the past 12 months."

Gold's allure manifests itself in positioning data. According to US government data, hedge funds and other large speculators increased net long positions in the metal sector to the highest level in 16 weeks in the week ending 20 January.

Silver's advance was supported by strong investment demand, including from retail buyers from Shanghai to Istanbul. At the same time, investors also await clarity on potential US trade tariffs.

Gold crossed the $5,100 an ounce threshold in the spot contract for the first time, while spot silver crossed the $100 threshold.

At the moment, the yellow metal, after retracing slightly, is still up 1.9 per cent at $5,085 in the spot contract, while futures stand at $5,756 (+0.55 per cent).

Spot silver, on the other hand, rose 4% to $107.5 and futures 6.81% to $107.8.

Purchases also reward platinum (+3.3% to $2,772 for spot) and palladium (+2% to $2,063 for spot).