Gold prices soared to an all-time high on Wednesday as investors sought safe-haven assets amid worsening trade tensions between the United States and China. Spot gold climbed 1% to reach $2,858.12 per ounce before settling at $2,855.32, marking a 0.5% gain for the day. Meanwhile, US gold futures closed at $2,884.60, up 0.3%.
The surge comes as fears of a global trade war intensify. On Tuesday, US President Donald Trump imposed an additional 10% tariff on all Chinese imports, prompting swift retaliation from Beijing. China responded by slapping tariffs on several US exports, including a 15% duty on US coal and liquefied natural gas (LNG), along with a 10% tariff on crude oil, agricultural machinery, large-displacement cars, and pickup trucks. China also hinted at potential sanctions on US tech companies such as Google.
“The potential economic consequences of a trade war between the U.S. and China are causing investors to fear a global recession and rising inflation,” said Dominik Sperzel, head of trading at Heraeus Metals Germany.
So far this year, gold prices have surged over 8% as geopolitical uncertainties and inflation concerns drive demand. London’s gold market is experiencing a shortage of short-term gold borrowing, exacerbated by significant transfers of gold to the US. Inventories at the New York Comex exchange have skyrocketed by 88% since the 2024 presidential election, as traders brace for the economic impact of Trump’s tariff policies.
Despite the ongoing rally, some analysts believe gold prices may soon correct. “Gold is overbought and needs to correct,” said Rhona O’Connell, an analyst at StoneX. “There is still scope for further upside, but barring any black swans, we still expect to see the price topping out this year.”
The World Gold Council reported on Wednesday that global gold demand in 2024 hit a record 4,974.5 metric tons, a 1% increase from the previous year. The rise was driven by heightened investment interest and increased purchases by central banks in the final quarter of the year.
