Gold prices surged to record highs on Wednesday morning, breaking through $5,200 for the first time and edging close to $5,300, as the US dollar slid to a near four-year low amid persistent geopolitical concerns and ahead of a Federal Reserve policy decision.
Gold futures (GC=F) rose 4% to $5,290.40 a troy ounce, while spot prices climbed 4.1% to $5,295.61 at the time of writing. Prices touched a new all-time high of $5,285.35 an ounce earlier in the session.
“[Gold’s rise] is due to the very strong indirect correlation with the dollar and… Trump’s remark to a casual question about the dollar, which implied that (there is) a broad-based consensus within the White House to have a weaker greenback going forward,” said Kelvin Wong, a senior market analyst at OANDA.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six major currencies, lost 0.2% to 96.08, a four-month low.
The drop followed comments from US president Donald Trump that suggested a degree of comfort with a weaker currency, according to traders and analysts.
Asked whether the dollar had fallen too far, Trump said its value was “great”.
Analysts said the president appeared to be taking a calculated risk, noting that a weaker dollar could support US exporters and help reduce the country’s trade deficit.
“When the person who could jawbone to defend the currency sounds unconcerned, the perceived backstop under the dollar gets thinner,” said Anthony Doyle, chief investment strategist at Pinnacle Investment Management.
Win Thin, chief economist at Bank of Nassau, said: “The Trump administration is taking a calculated risk.”
“Foreign exchange typically is the leader in terms of showing market discomfort with a country’s policies and economic outlook, so this dollar weakness bears watching.”
About the Author
