Gold has surged to a fresh record high, surpassing $3,500 (£2,614) an ounce, as investors flock to safe-haven assets amid global economic uncertainty and geopolitical tensions. The precious metal has nearly doubled in value since early 2023, driven by a weakening US dollar and central banks increasing their gold reserves while reducing holdings of US government bonds.
The rally coincides with rising long-term borrowing costs in the UK, France, and Germany. UK 30-year government bond yields hit a 27-year peak, intensifying pressure on Chancellor Rachel Reeves ahead of the autumn budget. France's 30-year yields reached their highest in over 16 years, while Germany's 30-year yields climbed to a 14-year peak.
The pound fell 1.2% against the dollar to $1.338, its biggest daily drop since April, following market turmoil after Donald Trump announced new tariffs. The FTSE 100 declined 0.7% to 9,131 points, retreating from last month's record high of 9,357 points. European and US markets also experienced sell-offs.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said heightened political and geopolitical risks underline gold's appeal. He predicted gold could reach $3,700 an ounce by next June, and possibly $4,000 if conditions worsen. Central banks in India, China, Turkey, and Poland have been adding gold to reserves, with gold overtaking the euro as the second-largest reserve asset last year.
Silver also rose to its highest level since 2011. Ipek Ozkardeskaya, senior analyst at Swissquote Bank, noted that the shift from US treasuries to gold accelerated this year due to US debt concerns and trade tensions. She added that Indian pension funds are seeking approval to invest in gold ETFs, signalling strong demand.
