Gold has smashed past $5,000 per ounce — mere months after topping $4,000 — in a record-setting rally that analysts say reflects growing fears over high government debt.
“The rise in precious metals prices is breathtaking and profoundly scary,” wrote Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance, in a Substack post on Sunday.
Spot gold rushed above a record high around $5,093 per troy ounce late on Sunday before pulling back to $5,070 per ounce at 12:03 a.m. ET on Monday.
The yellow metal’s record-setting blitz has little to do with central bank gold buying. International Monetary Fund data show that emerging-market central bank purchases of gold have been steady rather than explosive, with no acceleration following the wave of sanctions imposed after Russia’s full-scale invasion of Ukraine, wrote Brooks.
Instead, gold’s rally coincides with growing pressure on government bond markets in high-debt countries. Investors are piling into hard assets in the so-called “debasement trade,” driven by fears that heavy government borrowing will steadily erode the value of money.
“We’re at the start of a global debt crisis, with markets increasingly fearful governments will attempt to inflate away out-of-control debt,” wrote Brooks, who is also a former chief FX strategist at Goldman Sachs.
He pointed to strains in heavily indebted countries such as Japan, alongside a flight to safety into low-debt countries such as Switzerland, Norway, and Sweden.
One striking feature of the move is that it’s breaking long-standing market relationships. Historically, gold prices tend to fall when real interest rates rise, since gold is a non-yielding asset and holding it carries an opportunity cost in a high-rate environment.
That link has now broken down “in spectacular fashion,” Brooks said, as fears about fiscal sustainability overwhelm traditional valuation signals.
A weakening greenback could further fuel the move, as it makes it cheaper for non-dollar buyers to pile into dollar-denominated gold, he added.
The US Dollar Index is down 1.3% so far this year after holding broadly steady in the second half of 2025.
Geopolitical strains
Broader geopolitical concerns during President Donald Trump’s second term are also boosting both the precious and base metals complex, according to veteran market strategist Ed Yardeni.
Defense companies are ramping up production, boosting demand for metals, while an intensifying AI arms race is fueling capital spending across technology and infrastructure.
He pointed to the US fiscal outlook after President Donald Trump proposed boosting military spending to $1.5 trillion by 2027, up sharply from current levels.
The Committee for a Responsible Federal Budget has warned that the plan could add nearly $6 trillion to the national debt over the next decade — a concern that has coincided with rising Treasury yields.
“We are on alert for an attack on the US by the Bond Vigilantes,” Yardeni wrote on Sunday, referring to investors demanding higher yields as government spending and debt climb.
Despite gold’s dramatic run, Yardeni says the rally isn’t over. He is targeting gold at $6,000 by the end of this year — and $10,000 by the end of 2029.