Gold rose to a fresh record above $4 200 an ounce and silver surged, boosted by an escalation in US-China frictions and bets the Federal Reserve will cut interest rates twice more this year.
Bullion climbed as much as 1.8% to a peak of $4 218.29 on Wednesday. Spot silver advanced more than 3%, while the availability of the metal in the London market remained tight. Silver had a volatile day on Tuesday, when prices surge to an all-time high above $53.55 an ounce before tumbling sharply.
Yields on US Treasuries fell to the lowest levels in months, after Fed Chair Jerome Powell signalled the US central bank is on track to deliver another quarter-point cut later this month. Lower yields and borrowing costs tend to benefit precious metals, which don’t pay interest.
Meanwhile, risk-off sentiment dialled up — boosting gold’s haven appeal — after President Donald Trump issued a fresh trade threat to China. The comments injected fresh tensions into the relationship between the world’s two largest economies, with Beijing vowing to retaliate after Washington threatened an additional 100% tariff on China last week.
In silver, the market has been gripped by a lack of liquidity in London, sparking a worldwide hunt for metal and driving benchmark prices to soar above futures in New York. The gap between the two markets on Wednesday was about $1.05 an ounce, while the annualised on-month cost of borrowing silver was roughly 17% on Tuesday, both historically high levels.
Traders remain on edge ahead of the conclusion of the US administration’s so-called Section 232 probe into critical minerals, which includes silver, as well as platinum and palladium. The investigation has revived fears that the metals could be subject to new tariffs, even though they were officially exempt from levies in April.
The four main precious metals have surged between 60% and 82% this year, in a rally that’s dominated commodity markets. Gold’s advance has been underpinned by central-bank buying, rising holdings in exchange-traded funds, and Fed rate cuts.
Demand for havens has been aided by recurrent US-China trade tensions, threats to the Fed’s independence, and a US government shutdown. Investors have also been seeking safety in precious metals to protect themselves from the threats posed by runaway budget deficits — a phenomenon known as the “debasement trade.” Central bank buying has also been a key driver of the run-up in gold prices.
A lot of the gold rally “is being driven by physical buying, and if you look at central banks, they are going out and buying huge quantities”, Saad Rahim, chief economist at Trafigura Group. Fears of debt sustainability and the prospect of lower rates have investors “looking to gold as a store of value and for safety,” he said.
Spot gold traded 1.6% higher at $4 210.87 an ounce at 10:07 a.m. in London. Palladium and platinum also rose.
