Gold price hits $3,500 on flight to safe haven

Gold surpassed the $3,500-an-ounce for the first time Tuesday as weakness in the US dollar and trade war fears boosted demand for the safe-haven asset.

Spot gold breached a new record high of $3,500.05 per ounce during Asian trading hours, before paring some gains. By 10:30 a.m. in New York, the yellow metal traded at $3,438.14 for a 0.3% intraday gain. US gold futures also rose 0.5% to $3,444.60 an ounce.

Gold has set multiple new highs in recent sessions following US President Donald Trump’s repeated calls on the Federal Reserve to cut interest rates, a move seen as a threat to the central bank’s independence that has driven the dollar to its lowest since 2023.

The rally shows “that there is a desire to diversify out of dollar assets into a broader range of safe havens,” Kamakshya Trivedi, head of global FX, rates and emerging-market strategy at Goldman Sachs, told Bloomberg TV.

Ascending asset

Bullion has surged about 32% so far this year, outperforming nearly every other major asset class, as investors flee equities exposed to an expanding trade war.

Typically in risk-off moments, traders turn to US government debt. But given a recent selloff in bonds and the US fiscal position generally, gold is now “the only true safe haven left,” according to analysts at Jefferies Financial Group. 

“Gold’s rapid ascent this year tells me that markets have less confidence in the US than ever,” said Lee Liang Le, an analyst at Kallanish Index Services. “The ‘Trump Trade’ narrative has evolved into a ‘sell America’ narrative,” she added.

The rally began in early 2024, as central banks, seeking to diversify their foreign exchange holdings beyond the US dollar, became big buyers. More recently, flows into gold-backed exchange-traded funds have also picked up, with large markets like China seeing explosive growth in recent weeks.

Banks have also become progressively more positive about gold as this year’s rally has gone from strength to strength. Among them is Goldman Sachs, which forecasts the metal could hit $4,000 an ounce midway through next year.

Correction due?

Still, the rapid recent gain has stretched some closely watched metrics, suggesting the upswing could pause at some point, according to a Bloomberg analysis.

Gold’s 14-day relative-strength index — a gauge of the pace and intensity of moves — topped 78, above the level of 70 that can point to an asset being overbought.

“Bullion is extremely overbought in the short term, which makes it ripe for a correction. That, however, is not to be mistaken for its medium-term trajectory: bullion performs best when the global economy is in distress, and the scale of current economic uncertainty is immense,” said Dubai-based macro strategist Ven Ram.

(With files from Bloomberg)