Key Points
- Gold prices surged past $5,400 an ounce to a new record high.
- The rally was fueled by the Federal Reserve’s decision to hold interest rates steady and a weakening U.S. dollar.
- The “debasement trade” is in full swing as investors worry about massive government debt.
- Geopolitical tensions, including new threats against Iran, are also supporting prices.
Gold prices surged to a new record high on Wednesday, blowing past the $5,400 per ounce mark after the Federal Reserve announced it would keep interest rates steady. The decision, combined with a weakening U.S. dollar, has sent investors flocking to the safety of hard assets.
The “debasement trade” is in full swing. This is the idea that massive government debt is eroding the value of traditional currencies, pushing investors to buy things like gold to protect their purchasing power. “Unchecked fiscal debt creation continues to erode confidence in fiat currencies,” said one commodity strategist.
Gold has been on a tear this year, with prices up more than 20%. A falling dollar is “supercharging” the rally, as it makes gold cheaper for buyers using other currencies.
The Fed’s decision to hold rates steady, and the expectation of further cuts down the road, is also a major tailwind. The odds are also growing that President Trump will appoint a new, more “dovish” Fed chair who will favor even more aggressive rate cuts.
Geopolitical tensions are also playing a big role. On Wednesday, President Trump said a “massive Armada is headed to Iran,” a new threat that has only added to the market’s anxiety.
It’s not just gold. Silver jumped as high as $116 an ounce on Wednesday, and is up roughly 50% for the year. Platinum is also near record highs, and copper recently topped $13,000 for the first time.
For now, it seems the perfect storm of a weak dollar, easy money, and global uncertainty is creating a golden age for precious metals.
