Gold Surpasses $5,300. The Popular Safe-Haven Asset Emerges as the Dollar's 'Top Rival.'

Main Insights

• According to Morgan Stanley's metals and mining strategist, a weaker dollar is providing upward momentum for gold prices.

• Specialists in precious metals anticipate gold's upward trend will persist, though they caution that short-term price swings may occur as investors lock in profits.

When one asset declines, another can benefit—a dynamic that is currently shaping the growing interest in gold among investors.

For example, spot gold prices have surged past $5,300, continuing their upward trajectory after the U.S. dollar weakened the previous day. Although the dollar has recovered slightly, the Dollar Index—which measures the currency against a group of major foreign currencies—recently hit its lowest point in four years. This drop followed President Donald Trump's seemingly relaxed remarks about a weaker dollar.

These comments may be fueling gold's recent gains, which are also being supported by concerns over rising geopolitical tensions, inflation, government debt, and expectations of lower interest rates. Many traders now suspect that the Trump administration may be intentionally encouraging a weaker dollar, rather than it being a mere byproduct of policy uncertainty.

Why This Is Important

While some investors are optimistic about gold's continued rise, the flip side is that a declining dollar reduces the purchasing power of everyday Americans.

During a recent visit to Iowa, President Trump was asked about the dollar's fall. He responded, "I think it's great, the value of the dollar," and referenced past disputes with China and Japan over currency devaluation.

Matthew Ryan, head of market strategy at Ebury, noted that such remarks could lead market participants to believe that the Trump administration may be preparing a more coordinated effort to weaken the dollar.

A softer dollar can make U.S. exports more attractive to overseas buyers, help narrow the trade deficit, and boost the overseas earnings of American multinational companies.

Nigel Green, founder of deVere Group, commented, "The dollar's dominance is faltering. When leaders and policymakers show little concern over sharp declines, traders expect continued volatility."

Some currency analysts are now awaiting comments from Fed Chair Jerome Powell following the central bank's latest interest rate decision. Over the long term, many experts predict that gold will keep climbing, with a weaker dollar likely to further support the metal's ascent.

Additional Perspectives

Amy Gower, Morgan Stanley's metals and mining strategist, points out that several factors are working in gold's favor. She notes that investor interest in tangible assets remains strong, and that central banks lowering rates typically benefits non-yielding assets like commodities. She adds, "Further dollar weakness would provide an extra boost."

According to a recent Morgan Stanley report, gold is now the primary competitor to the dollar, with its share of central bank reserves surpassing U.S. Treasurys for the first time since 1996.

However, James Steel, chief precious metals analyst at HSBC, warns that the risk of a pullback in gold prices is increasing. He explains that the rapid surge in gold invites both volatility and profit-taking, especially if positive news emerges.