Gold prices smash through $5,000 barrier for the first time. Here's how high it could climb.
Gold prices soared past $5,000 per ounce for the first time as investors flocked to the safe-haven asset amid rising geopolitical uncertainty and U.S. economic concerns.
The precious metal topped $5,100 in trading on Monday, while silver and platinum also reached all-time highs, surpassing $100 and $2,800, respectively. Gold has nearly doubled from a year ago, when it traded for around $2,660.
Monday's rally came after President Trump said over the weekend that he would impose a 100% import tax on Canada if the country strikes a trade deal with China. That followed a separate threat by Mr. Trump to impose levies on eight European nations over their objections to his efforts to acquire Greenland.
The president eventually relented on those tariff threats after announcing that he and the secretary-general of NATO had agreed on the contours of a deal over Greenland.
Uncertainty drives gold prices
Wall Street watchers said Mr. Trump's aggressive approach to trade and foreign policy has stoked volatility in financial markets, leading investors to take refuge in gold and other shiny metals.
"Markets price stability, and current policy direction introduces a level of unpredictability that pushes capital toward hard assets," Nigel Green, CEO of deVere Group, an investment advisory firm, said in an email. "Gold benefits when political signals create uncertainty about growth, inflation and international cooperation."
The surge in gold is also rooted in concern over government borrowing, as debt levels across the U.S. and other major economies continue to mount. In May, Moody's Ratings downgraded the U.S. credit rating from the highest level — Aaa — to Aa1, one notch lower, citing rising U.S. government debt.
Fiscal factors
Rising debt and heavy government spending in the U.S. could spark inflation, according to economists.
"Gold is stepping back into its historical role as a store of value when trust in debt markets weakens," Green said.
Another factor driving investors into gold is the weakening dollar, according to investment analysts.
"The greenback has taken another hit as concerns continue to swirl (around) the impact of tariffs, high government spending and inflation on the U.S. economy, prompting investors to recalibrate their exposure to the U.S.," said Susannah Streeter, chief investment strategist at Wealth Club.
Gold is priced in dollars in global markets. As a result, when the dollar strengthens, gold becomes more expensive in other currencies. That often leads investors to pull back, weighing on its price.
Some Wall Street analysts think the price of gold is likely to continue climbing in the near term, with Société Générale analysts forecasting it to reach $6,000 by year-end.
