BREAKINGVIEWS-Gold shines brighter as red, white and blue dull

By Gabriel Rubin

WASHINGTON, April 24 (Reuters Breakingviews) - Gold is glistening more radiantly than ever. The yellow metal’s timeless hedge against economic turmoil has grown in value as investors increasingly fear the erosion of U.S. institutions and the country’s rule of law. It’s hardly a proxy for zero-risk American bonds or the once-almighty dollar, but is the next best thing in a fracturing world.

Big funds and central banks are bidding up the price of gold as the Trump administration vacillates on tariffs. It has soared 28% this year, reaching a record high $3,425 per ounce earlier this week. U.S. Treasury yields also have drifted higher, with the 20-year bond US20YT=RR closing above 4.9% on the same day gold peaked. Such concurrent rises are unusual and compound worries about the economy.

Monetary authorities have been stockpiling gold for years, with steep increases following Russia’s 2022 invasion of Ukraine. After the United States and its allies froze $300 billion of Moscow’s foreign reserves, which led to a cash crunch and accusations of theft from President Vladimir Putin, governments rushed to diversify away from U.S. dollars and bonds. Between 2010 and 2021, central banks on average bought a combined 473 tons of gold annually; from 2022 to 2024, the figure soared past 1,000, giving them about 20% of the world’s reserves. Individuals hold nearly half, mostly in jewelry form.

Wild gold trading is warping forecasts, too. The Federal Reserve Bank of Atlanta changed its growth projections after an earlier estimate indicated the U.S. economy would contract because of gold imports, which affect overall trade balances. Dealers at JPMorgan and other large banks have been physically moving bars on transatlantic flights to take advantage of the higher prices in New York than on London exchanges. These developments do not reflect a properly functioning international market, but rather intensifying efforts to seek safety from a storm.

Gold does not provide interest income the way U.S. bonds do and is much harder to carry around than dollars. Greenbacks also account for nearly three-fifths of all known central bank holdings because of its reserve status, but there are good reasons to think its decline will persist under Trump. Goldman Sachs Chief Economist Jan Hatzius, for one, said on Thursday that the dollar could weaken by another 25% against a basket of global currencies. As red, white and blue fade, gold will shine even brighter.

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CONTEXT NEWS

The price of gold reached $3,425 per ounce on April 21, a 28% increase since the start of 2025, before dipping to around $3,300 following positive signals from the Trump administration on trade negotiations and central bank independence.

Central banks bought 1,045 tons of bullion in 2024, accounting for about a fifth of demand, according to the World Gold Council. Dollar holdings at non-U.S. central banks have declined to 57% in 2025 from 70% in 2000.