Gold rallied to fresh record highs on Monday past $3400 for the first time in its history, as the dollar weakened and concerns about the economic impact of the US-China trade war grew, sending investors towards safe havens.
Spot gold prices rose 2.6% to $2415 an ounce as of 10:46 GMT, ith a record high at $3424.
Dollar’s Weakness Underpins Gold
The US dollar weakened sharply after fresh criticism by Trump towards Fed Chair Jerome Powell, hurting investors confidence, and in turn underpinning gold prices.
As tariff jitters and doubts about the stability of the US financial status grow, the haven demand on gold is likely to surge as well.
Gold surges over $700 in 2025
Gold is up over $700 so far this year, managing to pass $3300 on Wednesday and then adding $100 in a few days.
Several analysts expect the gold’s rally to peter out pretty soon with a likely peak rapidly approaching.
Minerals Market: Gold Leads
Silver rose 0.2% to $32.66 an ounce.
Platinum rose 1% to $957.15.
Palladium fell 3% to $934.34.
Powell Rattles the Markets
Fed Chair Jerome Powell warned last week that US tariffs could slow down growth and lead to higher prices for consumers, after chaos engulfed the financial markets.
Gold has thus become the final haven for many investors and the most bought asset in the world in a very short amount of time.
Historic Similarity
Analysts compared gold’s rally this year to the rally that happened during the Iranian Revolution in the late seventies, when prices surged by 120% between November 1979 and January 1980.
Gold passed $3000 for the first time ever last month amid concerns about the global trade war and as a haven against inflation.
Trump’s Tariffs
The Trump administration imposed upwards of 245% tariffs on Chinese imports, while imposing 10% base tariffs on all other countries around the world.
Trump said the aim is to bring manufacturing back to America and collect billions of dollars from tariffs, reducing the pressure on income taxes.
Factors Behind Gold’s Rise:
1- A weaker Dollar
The dollar index hit three-year loss amid rising risks with investors fleeing US assets while the Fed heads towards monetary easing measures.
A stronger euro also impacted the dollar, which in turn boosted gold prices.
2- Geopolitical risks, due to Trump’s aggressive tariff policies and unpredictable moves.
3- Stagflation Concerns
Investors are increasing concerns about a devastating combination between stagnation and inflation in upcoming months.
4- Lower Interest Rates
As global central banks cut interest rates worldwide, gold’s attractiveness is boosted compared to yielding assets.
5- Increasing purchases by global central banks.
6- A rebound in Exchange-Traded Funds based on gold, chief of which is the SPDR Gold Trust, the world’s biggest.
Risks
Gold is still burdened by the US 10-year treasury yield, which is standing at 2.15%, the highest since September 2023.
Despite the Fed starting the cycle of rate cuts, real yields continued to be stubborn, which weighs on gold prices.
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