Gold climbed to a fresh record high, rising above $3,500 an ounce in Asia and surpassing its April peak. Gold has nearly doubled in value since early 2023. The rally coincided with a weakening US dollar and increased central bank purchases of gold while some central banks reduced holdings of US treasuries. Long-term government bond yields rose to multi-year highs in the UK, France and Germany, putting pressure on public finances and stock markets. The pound fell slightly against the dollar and the FTSE 100 retreated from recent highs. UBS projected $3,700 by next June and acknowledged a potential rise to $4,000 if conditions worsen.
The rally comes as the US dollar has weakened and some central banks add to their gold holdings, ditching US government bonds, known as US treasuries. Mark Haefele, the chief investment officer at UBS Global Wealth Management, said heightened political and geopolitical risks underline the appeal of gold, which tends to benefit from uncertainty. He predicted gold could reach $3,700 an ounce by next June, but did not rule out a rise to $4,000 an ounce if geopolitical or economic conditions deteriorate.
At the same time, long-term borrowing costs rose to multi-year highs in the UK, France and Germany. UK 30-year government bond yields hit a 27-year high on Tuesday, intensifying pressure on Rachel Reeves, the chancellor, before her autumn budget. Yields measure the interest rate which an investor receives for holding a bond, and rise when the price of a bond falls. The pound has fallen by just more than 1% against the dollar, while the UK stock market declined along with indices across Europe.
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