The price of gold hit new record highs above $3,500 an ounce on Tuesday, as a number of long-term trends combined with renewed investor caution.
Shares in gold miners, such as Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF) and Fresnillo PLC (LSE:FRES) were among the few risers in the FTSE 350 in early trading, though peers such as Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF) and Atalaya Mining (AIM:ATYM, TSX:AYM) have been carried higher in recent weeks and months.
Gold's fresh all-time high of around $3,508/oz was reached in the early hours of Tuesday morning, surpassing a previous peak in April, with a resurgence after US trading started later in the day.
Demand for the yellow metal has accelerated over the past two years, driven by its safe haven status amidst what analysts and economists have attributed to concerns about sovereign debt in major economies, especially the US, further exacerbated by trade tensions and geopolitical risks.
"The rally reflects a softer dollar but also strong central-bank and institutional demand as investors rotate out of US Treasuries," said Swissquote Bank market analyst Ipek Ozkardeskaya.
The decline in the share of US Treasuries held by foreign central banks has been going on for over a decade, but central banks’ gold allocations have even surpassed their US Treasury holdings this year, she added.
"Meanwhile, Indian pension funds are seeking approval to invest in gold ETFs, hinting at strong demand despite record price."
Silver also surged to its highest level since 2011.
"Both metals have further room to run. Yet, with the gold–silver ratio still above its long-term range of 60-80, silver may have greater upside potential," Ozkardeskaya said.
The metal made strong push higher over the second half of August and into early September, said David Morrison at Trade Nation, in moves that "underscored continued demand for safe-haven assets".
He said moves in the metal were particularly apparent when tariff disputes and President Trump’s interventions against the Federal Reserve have come to the fore.
The gold price sold off as the US dollar rallied on the back of stronger bond yields, before picking up again in the US session.
A similar story for silver "reflected renewed investor interest in precious metals, with silver benefiting from its dual role as both a safe-haven and an industrial asset", said Morrison.
Adrian Murphy, CEO of Murphy Wealth, said gold hitting a new record price is "unsurprising against the backdrop of what is happening in the world at the moment" but said the timing is curious.
"The precious metal typically has a negative correlation with equity markets - in other words they move in the opposite direction to one another. Yet, many indices remain near all-time highs."
For any investors asking themselves whether now is the time to buy, he said the metal "should only ever be a small part of a much wider portfolio of assets... best seen as an insurance policy against falling stock markets or the value of currencies, such as the pound".
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