Gold and silver hit a new high, causing concern that the global monetary system may adjust

Although gold and silver prices seemed a bit too high at record highs, they still found strong support as the dollar continued to weaken, strengthening a broader shift in investor sentiment towards hard assets.

Both metals have benefited from the dollar's decline as analysts increasingly question its long-term role as the world's main reserve currency. Gold and silver prices have continued to rise as markets continue to digest heightened geopolitical uncertainty and economic volatility from the policy agenda.

Mind Money CEO Julia Khandoshko said that while gold may be vulnerable to a short-term pullback, the overall trend remains solid.

"We are seeing accelerated de-dollarisation, stable demand in developing countries and continued global currency issuance," she said. "In addition, US debt sustainability issues and growing geopolitical tensions such as new tariffs or purchases of Greenland remain. Coupled with pressure on the independence of the Federal Reserve, we support interest in gold as a safe-haven asset."

Analysts also noted that gold and silver continue to benefit from a fresh round of "sell America" sentiment that first emerged in April 2025, when aggressive global tariffs aimed at reducing the US trade deficit were implemented.

Linh Tran, a market analyst, said that the rising importance of gold is increasingly reflected in the composition of global reserves.

"Looking at the broader context of the global financial system, it is clear that gold is rising not just because of market anxiety, but also because confidence in the global monetary and fiscal order is shifting to a more cautious stance," Tran said in a note. "This does not appear to be a short-lived shock, but rather a process of repositioning gold's role within the system. It is clear that gold's future trajectory will not depend on a single variable such as interest rates or the dollar, but on the overall stability of the global monetary and fiscal framework."

The weakness of the dollar is already evident. In 2025, the dollar index recorded one of its worst performances in more than 50 years, falling about 9.4% from its close of 108.5 in December 2024 to about 98.3 at the end of the year. This downward momentum continued into the new year, with the dollar falling nearly 2% in January. This week, the index fell to a four-year low of 95.566.

At a time when the dollar was falling, people involved said they were not worried about a weaker dollar. "I think it's good, I think the value of the dollar, looking at the business we're doing, the dollar is doing well," people involved told reporters in Iowa on Tuesday when asked if they were worried about a weaker dollar.

However, analysts warn that the impact of a weaker dollar is far from simple and will continue to enhance gold's attractiveness as an inflation hedge and wealth preservation tool. Many investment institutions such asStoneWe are also following this trend.

"While a weaker dollar benefits exporters, it could add to inflationary pressures," Aaron Hill, head of market analysts at FP Markets, said in a note. "Think of it this way: The problem is that when the dollar depreciates, it becomes more expensive if you want to buy something abroad because the dollar has less purchasing power. For example, for businesses, for those importing materials, they will also face higher costs that they can pass on to customers, which can lead to inflation. The problem now is policy uncertainty. Actions ranging from threats of tariffs to plans for Greenland continue to roil markets and prompt investors to reduce their exposure to U.S. assets. This exacerbates the dollar's decline and could ultimately fuel inflation."

Beyond the dollar, some analysts have warned that confidence in broader fiat currencies is waning as markets remain sensitive to the recent turmoil in the Japanese bond market, raising concerns about liquidity risks in the global financial system.

Guy Wolf, head of global market analysis at Marex, said concerns about global currency depreciation could support gold prices for several years, as portfolio reallocations to gold remain a gradual process.

"Private investors are returning to gold, both as a hedge against currency depreciation and as a form of insurance against geopolitical risk, stock market overvaluation and broader macro uncertainty. Gold's rise is not just a function of dollar weakness, but rather reflects a broader erosion of global confidence in fiat currencies, with gold prices rising in almost every currency."

Looking to the future, Nitesh Shah, head of commodities and macroeconomic research at WisdomTree, said gold prices could rise well above current levels by the end of the year.

He noted that his model still recommends investors allocate between 15 and 20 per cent of their portfolios to gold. He added that given the sheer size of the global bond market, even small changes in asset allocation could have a huge impact on prices. "I understand why gold prices are like this," he said. "If the dollar remains the world's reserve currency, then there is a huge threat to the status quo and the global monetary system."

Daily chart of spot gold, source: Internet

Beijing time on January 29 at 11:17 spot gold, quoted at $5534.56/ounce