Gold rally shows no sign of fading

[Ben Graham]

Donald Trump is unconcerned that the US dollar is plunging and gold has reached $5,300 per ounce for the first time in history. The debasement trade is in full effect. The depreciation of major global currencies led by the greenback, together with an erosion of confidence in bonds amid rising sovereign debt, is forcing investors to seek alternatives — and precious metals look most attractive.

Fiscal stimulus in the US and Japan in the form of tax cuts, combined with the risk that the Supreme Court may rule US tariffs unlawful and trigger refunds, sharply raise questions about widening budget deficits, public debt, and financial instability. Bonds are ceasing to function as safe?haven assets. Money is flowing into gold. ETF holdings focused on the metal are swelling rapidly.

Gold ETF Holdings Dynamics

Alongside retail investors, central banks are active buyers. China, Poland, and others are snapping up physical bullion as part of de?dollarization and reserve?diversification processes.

The US economic policy uncertainty index has hit a record high, while precious metal volatility is at its peak since the pandemic. The first factor fuels the debasement trade, the second drives capital flows out of the crypto market. Bitcoin is in the black, as investors reassess Trump's promise to make America a crypto capital. Whereas the token was once treated as politically neutral, it is now tied to decisions made in the White House and Congress, including legislation.

Demand for gold is rising rapidly amid the reshaping of the international trade system. US threats against its former allies are splitting the West and redirecting attention toward the East. Canada is striking a trade deal with China despite Trump's threat of 100% duties on Canadian exports to the US. Europe is re?orienting supply chains, signing agreements with India.

No matter how White House policy uncertainty has neither toppled the greenback nor stripped it of reserve status. Previously, US Treasury Secretary Scott Bessent argued there is no link between the dollar's price and a "strong dollar" policy. He is likely wrong, a stance that is fueling interest in XAU/USD purchases.

Deutsche Bank believes that the precious metal could reach $6,000 per ounce on the back of strong investment demand.

Technically, on the daily chart, gold's quotes are distancing from dynamic support provided by moving averages. This signals bull strength and allows pullbacks to be used to build new long positions toward $5,400 and $5,600 per ounce after earlier target levels have been met.

The material has been provided by InstaForex Company - www.instaforex.com