Gold prices soar to record high amid tariff concerns

With market uncertainty mounting and global trade tensions escalating, analysts anticipate that gold prices will continue their upward trajectory, further solidifying its reputation as a safe-haven investment.

Gold prices surged to an all-time high on Friday, exceeding US$2,800 per ounce as market uncertainty grew over the possibility of U.S. President Donald Trump imposing new import tariffs on multiple nations.

According to Trading Economics data, spot gold climbed approximately 0.4% to US$2,808.38 per ounce during early afternoon trading. This represents a 5.7% increase for the month and an impressive 37% gain over the past year.

Tariff threats fuel market anxiety

Trump reiterated on Thursday his intention to impose tariffs on key trading partners such as Canada, China, and Mexico, potentially as soon as Saturday. However, reports from The Wall Street Journal suggest that his advisors are actively exploring strategies to mitigate the impact of such tariffs, particularly on Canada and Mexico, the U.S.’s largest trading partners.

"The increasing likelihood of a trade war is clearly boosting gold’s allure," said Ryan McIntyre, managing partner at Sprott Inc. "There seems to be a widening gap between countries rather than a coming together, and this is likely to continue in the medium term."

Uncertainty driving gold demand

McIntyre emphasized the role of gold as a safe-haven asset in times of economic and political instability.

"When uncertainty rises, gold becomes the go-to asset—especially now, when the risks are on the sovereign side rather than the corporate side," he explained. "Gold is independent of other assets and institutions, making it a preferred store of value. Trust in institutions appears lower now than in previous years, which further strengthens gold’s appeal."

Gold imports surge as traders hedge risks

In response to potential tariffs, gold imports into the U.S. from Switzerland soared in December, increasing nearly 20-fold compared to the same period a year earlier. Official Swiss customs data recorded gold exports to the U.S. at 64.2 tonnes, a sharp rise from 3.3 tonnes in December 2022. This marks the highest monthly gold shipment from Switzerland to the U.S. since March 2022, following the onset of Russia’s invasion of Ukraine.

Meanwhile, inventory levels in Comex vaults have surged by 75% to 926 tonnes, the highest level since August 2022. The Financial Times reported that since the November U.S. election, traders and financial institutions have relocated 393 metric tonnes of gold to the U.S.

Bullion shortage in London

The rapid stockpiling of gold in the U.S. has resulted in a bullion shortage in London, according to the Financial Times. Withdrawals from the Bank of England’s vaults now require a wait time of four to eight weeks—up from just a few days previously.

According to Joe Cavatoni, a senior market strategist at the World Gold Council, the movement of gold to the U.S. is a precautionary measure driven by concerns over potential tariff disruptions.

"While traders are reacting to uncertainty, I’m cautiously optimistic that gold itself won’t be significantly impacted," Cavatoni stated in an email. "The Trump administration’s rhetoric suggests that tariffs will be broad-based rather than specifically targeting monetary metals like gold."

Comex price disparities driving arbitrage

The rise in gold shipments is also fueled by price disparities between the U.S. Comex exchange and the London cash market. Higher prices in the U.S. have created a lucrative arbitrage opportunity.

"As long as the price of gold remains higher in the U.S. than in London, traders will continue taking advantage of the price difference," McIntyre noted. "Unlike other commodities, moving gold is relatively easy and cost-effective, allowing traders to exploit market discrepancies with minimal friction."

With market uncertainty mounting and global trade tensions escalating, analysts anticipate that gold prices will continue their upward trajectory, further solidifying its reputation as a safe-haven investment.