5 reasons gold prices are racing past $5,000 an ounce

Dubai: Dubai gold prices opened the week at new record levels, extending a rally that has gathered pace through January and shows little sign of cooling. By 9:00 am on Monday, 24-carat gold was priced at Dh610.75 per gram, up sharply from Dh601 over the weekend. The 22-carat variety followed the same trajectory, rising to Dh565.75 from Dh556.50. (Check latest UAE gold prices here, alongside prices in Saudi Arabia, Oman, Qatar, Bahrain, Kuwait, and India.)

Prices have climbed almost without interruption since the start of the month, reflecting a combination of global risk aversion and sustained local demand. Early January levels near Dh520 for 24-carat gold now feel distant, with gains accelerating over the past ten days as prices pushed past successive psychological thresholds.

A steady climb through January

The upward move has been broad-based. Mid-month prices hovered in the mid Dh550s for 24-carat gold before advancing to the high Dh570s and low Dh590s in quick succession. By the third week of January, prices were testing Dh600 and have since broken decisively higher. The 22-carat segment mirrored that climb, moving from just above Dh500 at the start of the month to the mid Dh560s by Monday morning.

Gold has surged beyond $5,000 an ounce for the first time, marking a defining moment in a rally that has been building for months and accelerated sharply in recent weeks. Bullion climbed more than 2% to around $5,093, with momentum spilling across precious metals markets and reinforcing gold’s status as the world’s preferred hedge in periods of stress.

The scale and speed of the move reflect a convergence of political risk, currency weakness and growing unease around global debt. Together, these forces are reshaping investor behaviour and pushing gold into territory few had predicted at the start of the year. Here are 5 reasons behind gold's record rally.

1. A flight from currencies and sovereign bonds

Demand for gold has strengthened as investors retreat from government bonds and paper currencies. Heavy selling in the Japanese bond market last week highlighted growing discomfort with aggressive fiscal spending and rising debt loads. Gold has benefited from this shift, gaining more than 17% so far this year after delivering its best annual performance since 1979.

This rotation reflects what traders describe as the debasement trade. Confidence in fiat currencies has weakened, driving capital toward assets perceived as stores of value rather than promises backed by debt.

2. Dollar weakness adds fuel to the rally

A softer US dollar has amplified gold’s gains. A widely followed gauge of the currency has fallen almost 2% in six sessions, making bullion cheaper for buyers outside the United States. Speculation that Washington may support Japan’s efforts to strengthen the yen has added to uncertainty around currency policy and reinforced demand for gold.

Concerns around the independence of the Federal Reserve have also resurfaced, increasing investor sensitivity to any signal that monetary policy could be influenced by political priorities.

3. Political risk returns to centre stage

Markets have been unsettled by a series of geopolitical flashpoints. Recent actions by the Trump administration have heightened uncertainty, ranging from renewed attacks on the Federal Reserve to threats involving Greenland and military intervention in Venezuela. Over the weekend, President Donald Trump warned of 100% tariffs on Canadian exports should Ottawa pursue a trade deal with China, escalating tensions between major economies.

Domestic political risk inside the US has added another layer of anxiety. Senate Democratic leader Chuck Schumer has threatened to block a major spending package unless funding for the Department of Homeland Security is removed, raising the prospect of a partial government shutdown.

4. Debt fears and inflation hedging

Swelling public debt in advanced economies has become a central pillar of gold’s rally. Long-term investors increasingly view inflation as the most likely path governments will use to manage debt burdens. Gold is being bought as a means of preserving purchasing power rather than chasing short-term price gains.

This structural demand has reduced sensitivity to short-term pullbacks, allowing prices to grind higher with limited resistance.

5. Rate cut expectations lift non-yielding assets

Attention has turned to the Federal Reserve leadership outlook after Trump said he has finished interviewing candidates for the next chair and already has someone in mind. Expectations of a more dovish appointment have strengthened bets on further interest rate cuts following three reductions already delivered.

Lower rates reduce the opportunity cost of holding non-yielding assets such as gold, making bullion more attractive relative to cash and bonds.

Silver’s surge to record highs above $100 an ounce highlights the breadth of the move across precious metals, supported by strong retail demand from Shanghai to Istanbul.

- With inputs from Bloomberg.