Evgeny Goryunov, Head of Monetary Policy Department at the Gaidar Institute, explained in a commentary for Izvestia the reasons for rising costs of precious metals, linking it to a decline in trust in the traditional foundation of the global financial system.
The expert noted that there are no formal preconditions for the collapse of the dollar system, however, the human factor is making significant adjustments. "The dollar and the US financial market have long been the foundation of the global financial system. The US government bonds have been (and remain) the world's main safe haven asset, maintaining their value even during crises."
"There are no fundamental or objective reasons why this configuration of the global financial system must necessarily change," he noted. However, he added, the US administration's actions launched a significant blow to confidence. "At that time, we saw rising US bond yields and a simultaneous dollar weakening, which clearly indicates a decline of confidence in the US currency and the market. The Economic Policy Uncertainty Index stabilized at a level previously seen only during the pandemic. It didn't fall below 300, although previously it had mostly hovered around 150," stated Evgeniy Goryunov.
In this context, investors are seeking other reliable assets: "There is no good alternative to the dollar, thus, demand is spreading across different markets and assets. The rising price of gold and likely silver reflects this trend."
He also emphasized the paradoxical nature of precious metals as an investment instrument. "The gold specifics is that its prices are highly volatile. This is the contradictory nature of gold as an asset, it is perceived as a reliable asset, but in reality, investing in gold is quite risky due to high degree of price uncertainty," noted Evgeniy Goryunov.