Bond market jitters send gold price to record high as investors seek safe havens

Gold prices hit a record high yesterday as bond jitters reverberated through financial markets, sending investors piling into safe havens.

The precious metal, seen as a store of value during wider turbulence, topped $3,500 an ounce for the first time and some forecast it could reach $4,000.

The rise came as bonds sold off across the world amid fears that governments will struggle to tackle their towering debt mountains – and the jitters also spread to stocks.

Susannah Streeter, head of money and markets at broker Hargreaves Lansdown, said: ‘Warning lights are flashing about increasingly tricky economic conditions and geopolitical risk.’ UK bonds, known as gilts, saw a notable sell-off. 

Yields on 30-year gilts – which rise as their prices fall – climbed to more than 5.7 per cent, the highest level since 1998.

Benchmark ten-year gilts also soared, climbing to more than 4.8 per cent, the highest since January.

Safe haven: Gold, seen as a store of value during wider turbulence, topped $3,500 an ounce for the first time and some forecast it could reach $4,000

The pressure on Britain’s bond market was widely blamed on fears over Labour’s Budget plans, but there were also notable sell-offs in France, whose government is facing imminent collapse, as well as Germany and the US.

In America, where Donald Trump’s unprecedented attacks on the US Federal Reserve have raised questions about the central bank’s independence, investors are nervous about whether inflation^[1] can be kept under control.

The nerves spread to stock markets too, where the FTSE 100 lost 79.65 points, or 0.9 per cent, to close at 9116.69, the lowest level in nearly a month.

In Paris, the Cac 40 lost 0.7 per cent and Germany’s Dax tumbled by 2.3 per cent. New York’s Dow Jones, S&P 500 and Nasdaq were also all trading lower.

The turmoil was a boon for gold, which spiked to $3,531 per ounce.

Analysts at investment bank UBS said: ‘An increase to $4,000/oz in a risk scenario where geopolitical or economic conditions deteriorate cannot be ruled out.’

The gold price is up by more than a third this year, partly helped by a move away from dollar assets, blamed on Trump’s erratic trade policies and attacks on the Fed. 

Yesterday, the dollar was a beneficiary of the flight to safe haven investments but it is down by more than 9 per cent for the year to date.

Nigel Green, boss of financial advisory group DeVere, said: ‘Investors are hedging against fiscal irresponsibility, currency weakness, and the erosion of trust in political systems. 

‘The parallel moves in bonds and gold highlight the fragility of the global financial environment.’