After a brief pullback, gold has stabilized strongly, approaching 5100, while silver has returned to 110

The precious metals market continues its strong upward trend, with gold briefly retreating after breaking through the historical high of $5,100, stabilizing above $5,070 on Tuesday, while silver returned to the $110 mark after reaching a record high of $117.

This ongoing rally, which has lasted for seven trading days, is driven by a weaker dollar, geopolitical risks, and investors fleeing sovereign bonds in a "currency devaluation trade."

The tariff threats from the Trump administration have intensified market risk aversion. According to CCTV News, Trump stated that, given South Korea has not yet passed the "historic trade agreement," he has decided to raise the tax rates on South Korean automobiles, timber, pharmaceuticals, and other equivalent tariff items from 15% to 25%. Previously, he also threatened to impose a 100% tariff on Canada, and this policy uncertainty has prompted investors to flock to traditional safe-haven assets like gold.

The weak dollar has provided additional support for gold prices. The dollar index has fallen to a near four-year low, with speculation that the U.S. may assist Japan in supporting the yen, coupled with the risk of a government shutdown and the unpredictability of Trump's policies, putting pressure on the dollar. A weaker dollar reduces the cost of dollar-denominated gold for overseas buyers.

The Federal Reserve's policy meeting this week is expected to keep interest rates unchanged, but market focus has shifted to Trump's criminal investigation of Federal Reserve Chairman Jerome Powell and his attempts to dismiss Federal Reserve Governor Lisa Cook. Trump stated that he has completed interviews for the next Federal Reserve Chairman candidate, and a more dovish choice may increase expectations for further rate cuts this year, benefiting non-yielding gold.

Precious Metals Strengthen Across the Board

On Tuesday, spot gold rose 1.26% to $5,071.41 per ounce, after touching a historical high of $5,110.50 the previous day. U.S. February gold futures increased 0.4% to $5,063.0. Gold prices have doubled over the past two years and have risen 17% year-to-date.

Silver performed even more impressively, rebounding above $110 per ounce on Tuesday, after nearly giving back all gains following a record high of $117.69 the previous day. This white metal has surged 55% so far this year.

Platinum fell 2.5% to $2,688.12 after reaching a record high of $2,918.80 the previous trading day, while palladium rose slightly by 0.1% to $1,980.50.

"Currency Devaluation Trade" Dominates the Market

Investors are significantly withdrawing from sovereign currencies and government bonds, turning to embrace gold, making this "currency devaluation trade" the main force driving gold prices. The massive sell-off in the Japanese bond market is the latest example of investors refusing to accept large-scale fiscal spending The dramatic rise in gold prices highlights its historical role as a market panic indicator. After achieving its best annual performance since 1979 in 2023, gold prices continue to surge this year. A series of recent actions by the Trump administration—threatening to annex Greenland, military intervention in Venezuela, and attacks on the independence of the Federal Reserve—have further shaken the market.

Speculator positioning data shows the appeal of gold, with options traders preparing for further gains in the hot market. The implied volatility of Comex futures has risen to its highest level since the peak of the COVID-19 pandemic in March 2020, and the volatility of the world's largest gold ETF—State Street's SPDR Gold Shares—has also surged.

Buying Sentiment Supports Future Market

City Index Ltd analyst Fawad Razaqzada stated, “Traders are buying the dips rather than shorting the rallies. As long as this sentiment persists, it will be difficult to argue against prices rising in the short term, even if there is a short-term disconnect between fundamentals and reality.”

In a hot market, few are willing to go against the trend. The Federal Reserve is expected to maintain interest rates at its monetary policy meeting starting on Tuesday, but this meeting is overshadowed by the Trump administration's criminal investigation into Powell, attempts to dismiss Fed Governor Cook, and the upcoming nomination of a successor to Powell in May.

The surge in gold prices has also driven mining consolidation. Zijin Mining will acquire Canadian Allied Gold for approximately CAD 5.5 billion (USD 4.02 billion) in cash, as this Chinese miner accelerates its global expansion against the backdrop of record-high gold prices. The unprecedented rise in gold has boosted miners' profit margins and cash flow, driving industry consolidation