Gold extended its rise further toward the $3,200 per ounce mark on Friday, a new record, lifted by a weaker US dollar and surging demand for safety following the latest escalation in the US-China trade war.
Gold surges to fresh record
China lifted its tariffs on US goods to 125% as of April 12th and stated it will ignore any further US responses after a series of increases in tariffs by the White House topped out at 145%. These drastic measures are expected to impact nearly $700 billion worth of goods exchanged annually between the world’s two largest economies, significantly disrupting global trade flows. The move has intensified risk aversion, as investors seek safe-haven assets, pushing gold to new highs.
Trade conflict impact
The escalating trade conflict, combined with heightened uncertainty, has led to a retreat from riskier assets that are sensitive to global growth prospects, such as equities, and has bolstered flows into safer assets like gold. Additionally, investors are becoming more cautious about global economic growth, which has been further exacerbated by geopolitical tensions. On the monetary policy front, the Federal Reserve gave no indication that it will intervene in policy to cap the surge in long-dated yields, though the rising bond yields, coupled with softer inflation data, is feeding into market expectations that the central bank may cut rates later in the year. The March Consumer Price Index (CPI) report, showing further evidence of disinflation, only added to these expectations, reinforcing the case for a dovish shift by the Fed, which in turn supports the appeal of bullion as a hedge against inflation. With ongoing uncertainty in global markets, gold remains a popular hedge for investors seeking to preserve value in volatile times.
