Latest gold surge points to 2008 fears
In this DML Report…
Gold futures climbed above $4,000 per ounce for the first time on Tuesday morning, marking a historic high as investors turned to the metal amid fears of economic instability tied to a U.S. government shutdown. The price has risen approximately 50 percent over the past 12 months, with a 0.5 percent increase during mid-morning trading and the New York spot price reaching $3,960.60 per troy ounce. Ray Dalio, founder of Bridgewater Associates and forecaster of the 2008 crash, advised allocating about 15 percent of portfolios to gold, calling it a "very excellent diversifier." David Morrison, senior market analyst at Trade Nation, noted that investors are increasingly buying gold as safe-haven demand persists. Global central banks are acquiring gold at record levels to counter potential U.S. tariffs, while consumers purchase bullion to hedge against inflation.
Gains in gold mirror rises in other metals, with silver hitting a 14-year high and platinum reaching levels unseen in 12 years, both driven by uncertainty from President Donald Trump's tariffs. Bank of America issued a bearish alert on Monday, warning that the gold peak signals "uptrend exhaustion" and risks a rapid correction. Bret Kenwell, investment analyst at eToro, countered that while gold may be overheated short-term, it has outperformed the S&P 500 in four of the last seven years and is on track to do so again in 2025. Stock markets have seen heavy inflows, with the tech-heavy Nasdaq up 55 percent since March and April declines; at mid-morning Tuesday, the S&P 500 and Nasdaq edged higher, while the Dow Jones Industrial Average fell less than 0.1 percent. The indexes have set multiple records over months of gains, fueled by optimism around artificial intelligence.
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OpenAI, Anthropic, and other AI firms are raising billions publicly, channeling funds into computer chips, cloud services, and data centers despite high cash burn and distant profitability. Wall Street's valuation now stands at 2.17 times the U.S. economy's output, creating imbalances. Paul Tudor Jones, predictor of the 1987 crash, described the investment landscape as "potentially explosive." Mark Spitznagel, chief investment officer at Universa Investments, likened current conditions to the prelude to the Great Depression. Ray Dalio cautioned that the federal deficit risks an "economic heart attack." Warren Buffett has built a record cash pile and placed his first major bet last week but offered no comment on market risks. The gold rally underscores deepening concerns for the U.S. economy.