Silver jumped to a new record high above $109 an ounce during trading on Monday, posting gains for the third consecutive day, amid US President Donald Trump's reshaping of international relations and a growing flight of investors from sovereign bonds and currencies.
Silver received additional support from the decline in the dollar, as the US currency index fell by about 2% over six sessions, amid growing speculation that the United States may support Japan in its efforts to strengthen the yen, which has increased concerns about the independence of the Federal Reserve and the volatility of economic policy directions under Trump.
Much of this surge is attributable to what is known as currency erosion trading, where investors abandon currencies and Treasury bonds in favor of real assets. The sharp sell-off in the Japanese bond market last week was a clear example of investors' aversion to excessive fiscal spending.
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Political unrest boosts demand for precious metals
Recent weeks have seen escalating market anxiety due to the Trump administration's actions, including repeated attacks on the Federal Reserve, the threat to annex Greenland, and talk of military intervention in Venezuela. In this turbulent climate, the appeal of precious metals as a safe haven has become stronger than ever for investors seeking stability.
Over the weekend, Trump threatened to impose 100% tariffs on all Canadian exports to the United States if Ottawa reached a trade agreement with China, escalating tensions between the two countries. Meanwhile, political uncertainty remains high in the United States after Senate Democratic Leader Chuck Schumer vowed to block a massive spending package unless Republicans cut funding to the Department of Homeland Security, raising the risk of a partial government shutdown.
The surge in public debt in advanced economies has become an additional driver of the gold and precious metals rally. Some long-term investors believe that inflation may be the only way for countries to maintain their debt sustainability, leading them to turn to precious metals as a way to protect their purchasing power.
Concerns about debt and the Federal Reserve are reshaping the investment landscape.
John Read, chief strategist at the World Gold Council, said that concern about the long-term trajectory of public debt has risen markedly over the past three years, noting that this type of thinking is particularly prominent among family offices that focus on protecting wealth across generations rather than focusing on short-term gains.
Investors are now awaiting Trump's choice for the next Federal Reserve chair, after he announced he had concluded interviews with candidates and confirmed he had a specific name in mind. Observers believe that appointing a more dovish chairman would bolster expectations of further interest rate cuts this year, which would benefit non-yielding precious metals.
Vasu Menon, executive director of investment strategy at Overseas Chinese Banking, said that much of the geopolitical uncertainty created by Trump is unlikely to disappear anytime soon.
On the other hand, silver continued to receive support from strong investment demand, including purchases by individuals from Shanghai to Istanbul, at a time when investors are also awaiting clarity on potential US trade tariffs. Silver has risen by approximately 5% during this trading session, reaching $107.9 per ounce.
