As global investor sentiment takes its toll on the dollar, gold demand has continued to surge as a safe haven asset, reaching an all-time high trading price of $3 592/oz in the week ended September 5.

The gold price typically rises when the dollar weakens and decreases again once the dollar strengthens, with some exceptions having been observed in recent years.

Gold is currently a more attractive investment prospect than the dollar as insurance against US government and central bank mistakes, says precious metals refiner Heraeus.

The firm adds that the US government has been interfering in central bank business by pressuring for interest rate cuts, which adds risks of monetary policy errors compounding fiscal policy mistakes.

Heraeus says the dollar may be entering a prolonged period of depreciation. In trade-weighted terms, the dollar is still as strong as it was in the early 2000s, although it has come down from its recent peak level and global trade with the US has been significantly disrupted by President Donald Trump’s radical trade regimes.

Heraeus explains that even if the US Supreme Court rules that Trump did not have the authority to implement reciprocal tariffs, the issues of tariffs and US trade deficits are unlikely to go away.

The firm adds that the steel, aluminium and automotive tariffs, in particular, will remain owing to them having been implemented in a different manner.

Heraeus is confident that central banks will continue adding gold to their reserves, especially in efforts to reduce exposure to the dollar.

This while gold-backed exchange-traded fund (ETF) holdings have increased by 397 t, or 12.3%, in the first half of the year, compared with the first half of last year, while bar and coin demand has increased by 6.4% year-on-year over the same period. 

Meanwhile, Heraeus reports that central banks are also showing growing interest in silver. The Saudi Central Bank has acquired $40.6-million worth of shares in the iShares Silver Trust and Global X Silver Miners ETF.

However, these investments in silver could be part of the country’s sovereign wealth fund’s broader investment strategy.

Although the ETFs are backed by physical metal, this is not a direct purchase of physical bullion. Unlike gold, silver has not been a staple in central bank reserves, but recent activity indicates that some central banks may be exploring it as a means of diversifying reserves, Heraeus explains.

The firm adds that Russia also announced plans to buy $535-million worth of silver over the next three years.

Silver spot prices rose above $40/oz on September 2, which marked a 14-year-high, driven by rising Federal Reserve rate-cut expectations in the US.

Platinum and palladium prices held steady at $1 382/oz and $1 112/oz, respectively, in the week ended September 5, while rhodium prices slipped by $50/oz to $7 675/oz in the week.