Gold prices have reached unprecedented heights as concerns about the ongoing trade war between the United States and China escalate.
On Wednesday, spot gold hit $3,357.40 (£2,540) per ounce, marking a significant rise of nearly one-third since the beginning of the year, before experiencing a slight dip from this peak.
Investor anxiety was fueled by remarks from Federal Reserve Chairman Jerome Powell, who indicated that the tariff policies introduced by President Donald Trump could lead to slower economic growth, increased prices, and potential job losses. Speaking at the Economic Club of Chicago, Powell highlighted the impact of higher-than-expected tariffs, which have exacerbated fluctuations in global financial markets amid rising trade tensions.
Stephen Innes, head of trading and market strategy at SPI Asset Management, noted that gold has entered “full lifeboat mode” as investors turn to the precious metal, which is viewed as a safer asset during times of economic uncertainty. He described gold as “the most crowded trade on the planet,” indicating a significant influx of investment in this traditional safe haven.
As portfolio managers grapple with unpredictability in political decision-making, many are seeking refuge in “real” assets like gold. Analysts have likened the current gold rally to the dramatic price surge of 120% witnessed during the Iranian Revolution from 1979 to 1980. Gold recently surpassed the $3,000 mark for the first time, driven by fears surrounding the global trade conflict.
Jesper Koll from Monex Group remarked that gold is increasingly regarded as a hedge against inflation and government instability. With inflation concerns mounting, investors are drawn to safe haven assets like gold. Since returning to office, Trump has imposed hefty tariffs, including 145% on imports from China, which in turn has retaliated with a 125% tariff on US goods. The situation remains fluid, with uncertainty surrounding additional tariffs that were temporarily paused.
The Trump administration has defended these trade measures, asserting they will not only protect American jobs but also reinvigorate domestic manufacturing and generate significant tax revenue.
