Spot Gold Prices Surge Amid Trade Tensions
Spot gold saw a significant increase of nearly 2% reaching $3,235.89 an ounce as of 2:32 p.m. ET, following a record high of $3,245.28 earlier in the trading session. This surge marks over a 6% gain for the week.
U.S. gold futures also climbed 2.1%, settling at $3,244.60. Industry experts highlight that, ‘Gold is clearly seen as the favoured safe-haven asset in a world upended by Trump’s trade war,’ according to Nitesh Shah, commodities strategist at WisdomTree.
In a recent escalation of trade conflicts, China raised its tariffs on U.S. imports to 125%, intensifying the economic standoff between the two largest economies in the world. As a result, the dollar has depreciated, making gold appealing to overseas buyers.
This year’s rally in gold prices has been supported by several factors, including central bank purchases, expectations of U.S. Federal Reserve rate cuts, geopolitical tensions, and increased investments in gold-backed ETFs.
Market Insights and Economic Indicators
In March, the U.S. faced an unexpected 0.4% drop in monthly producer prices; however, tariffs on imports are likely to push inflation higher in the months ahead. Traders are now betting on a resumption of rate cuts by the Fed starting in June, anticipating approximately 90 basis points in cuts by the end of 2025.
Tai Wong, an independent metals trader, noted, ‘A minor correction (for gold) wouldn’t surprise, but the path forward is up and away as CPI and PPI give the Fed more room to cut and will keep downward pressure on the dollar.’
Gold has traditionally served as a hedge against global uncertainties and inflation, particularly in low-interest-rate environments.
Potential Factors to Watch
Despite the current upward trend in gold prices, UBS analysts warn that certain developments could limit its increase. These factors include ‘easing geopolitical tensions, a return to more cooperative trade relations, or a significant improvement in the U.S. macro and fiscal backdrop.’
In related market movements, spot silver gained 3.2% to $32.18 per ounce, while platinum and palladium saw minor fluctuations, with platinum falling 0.2% to $936.36 and palladium rising 0.7% to $914.87.
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