Gold (GC=F) rose above $5,000 an ounce on Sunday, hitting the key milestone earlier than Wall Street expected, raising questions about the dizzying speed of the rally in precious metals.
The rise in gold has become a feature of the so-called “debasement trade”, with investors buying assets to protect against the erosion of purchasing power amid rising government debt around the world.
“The rise in the prices of precious metals is breathtaking and deeply frightening,” wrote Robin Brooks, Senior Fellow at the Brookings Institution on Sunday, noting that the rise in gold prices is “part of something much bigger.”
“We are at the beginning of a global debt crisis, with markets increasingly fearful that governments will try to inflate debt out of control,” Brooks wrote.
Brooks noted that while the US dollar (DXY.NY-B) remained relatively stable during the second half of last year, it started the year on a downward trajectory.
“A falling dollar will greatly increase the rise in gold prices and debasement trade because it will boost the purchasing power of non-dollar buyers,” Brooks wrote.
Goldman Sachs recently raised its year-end price target from $4,900 to $5,400, noting increased participation from private investors looking to diversify portfolios and protect wealth.
“We see the risks to our improved gold price forecast as two-sided but still significantly skewed to the upside as private sector investors may diversify further on lingering global policy uncertainty,” the analysts said.
Bullion has turned higher in every major geopolitics this year, including the US capture of Venezuelan leader Nicolás Maduro and President Trump’s threat of tariffs in pursuit of Greenland.
The precious metal is up 15% year-to-date, after a 65% increase in 2025.
Although foreign central bank demand for gold has been strong amid reduced exposure to US Treasuries, Brooks of the Brookings Institution argued that this does not explain the massive rise in gold prices so far this year.
“The fact that this is a broad bubble across all precious metals argues against central banks being a major driver,” Brooks wrote.
Elsewhere in precious metals (SI = F) it topped $100 for the first time on Friday, and continued its rise Sunday night to above $107. Platinum (PL=F) also touched new highs, gaining more than 40% so far this year..
Copper (HC = F) on Friday rose to a record high above $13,000 per ton in London.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow it on X above @ines_ferre.
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