Gold Reaches Record High Amid U.S.-China Trade War Tensions

Despite ongoing economic uncertainty, gold is expected to continue benefiting from its status as a safe-haven asset in volatile times.

The price of gold hit an all-time high of $2,848.27 per ounce on Wednesday, following a nearly 1% increase in the previous session. This surge comes amid escalating economic tensions between the United States and China, driving demand for safe-haven assets.

Key Factors Driving Gold’s Rise

The gold rally followed U.S. President Donald Trump’s announcement of a 10% tariff on Chinese imports, prompting a swift yet more targeted response from Beijing. Additionally, the U.S. dollar weakened on Tuesday, making gold more affordable for international buyers. The dollar’s decline accelerated after a U.S. jobs report indicated a gradual slowdown in the labor market.

While China’s response was more subdued compared to previous rounds of the trade war, when Beijing imposed tariffs nearly matching those of the U.S., investors remain uncertain about the broader economic impact on the world’s two largest economies. Market participants are also watching for potential ripple effects on U.S. monetary policy, should the tariffs lead to a resurgence in inflation.

Precious Metals Market Performance

As of 8:46 a.m. in Singapore, spot gold rose 0.2% to $2,847.85 per ounce. The Bloomberg Dollar Spot Index remained flat after a 0.7% drop on Tuesday. Meanwhile, silver dipped slightly, palladium held steady, and platinum saw a modest increase.

Fears of a worsening trade war had already shaken precious metals markets before Trump’s latest tariff decision. In recent weeks, U.S. gold and silver prices have surged above international benchmarks, leading traders and dealers to rush large volumes of the metals into the American market ahead of any additional tariffs. This turmoil has also led to a spike in lease rates for gold and silver—the return that holders of metal in London’s vaults can earn by lending it out on a short-term basis.

Gold’s Short-Term Outlook

Despite ongoing economic uncertainty, gold is expected to continue benefiting from its status as a safe-haven asset in volatile times. However, its appeal may diminish if interest rates remain elevated for an extended period, increasing the opportunity cost of holding non-yielding assets like precious metals.

Investors will closely monitor upcoming Federal Reserve decisions and the evolution of U.S.-China trade relations to gauge their future impact on gold and other precious metals.