Gold surges to record high amid US-China trade war tensions

Gold prices have reached a record high as escalating tensions in the US-China trade war drive investors toward safe-haven assets. Market uncertainty and economic instability have fueled increased demand for gold, pushing its value upward. Investors seek protection against potential financial risks, leading to heightened interest in precious metals. As global trade conflicts continue, gold remains a preferred hedge against inflation and market volatility, reinforcing its role as a key investment option.

Gold prices soared to a historic peak, reaching $2,849.05 per ounce on Wednesday. This sharp rise followed a nearly 1% gain in the previous trading session, as escalating tensions between the U.S. and China fueled investor demand for safe-haven assets. The latest surge in bullion prices came after President Donald Trump imposed a 10% tariff on Chinese imports, prompting a measured but strategic response from Beijing.

Unlike the aggressive retaliatory measures seen during Trump’s first term, China’s response was more restrained. However, concerns remain over the broader economic impact of the trade conflict on the world's two largest economies. Investors are closely monitoring whether these developments will influence U.S. monetary policy, particularly if renewed trade tensions contribute to inflationary pressures.

Adding to market uncertainty, Trump suggested during a press conference with Israeli Prime Minister Benjamin Netanyahu that the U.S. should assume control of the Gaza Strip and take charge of rebuilding efforts in the war-ravaged region. This geopolitical development has heightened unease among investors, further strengthening gold’s appeal as a safe-haven asset. However, the metal's momentum could be tempered if interest rates remain elevated, limiting its attractiveness compared to other investments.

Meanwhile, the U.S. dollar weakened following the release of employment data on Tuesday, which pointed to a gradual slowdown in the labor market. A declining dollar typically benefits gold, as it makes the metal more affordable for international buyers. The Bloomberg Dollar Spot Index declined by 0.1%, following a 0.7% drop the previous day.

Market analysts believe gold will continue to gain support amid ongoing economic and geopolitical uncertainties. Charu Chanana, a strategist at Saxo Capital Markets Pte, noted that with no positive developments in U.S.-China negotiations and rising geopolitical tensions, gold is likely to see further gains, regardless of fluctuations in the dollar.

As of 9:17 a.m. in Singapore, spot gold had inched up 0.1% to $2,844.82 per ounce. While silver and palladium experienced slight declines, platinum registered a modest increase.

Concerns over trade disruptions had already been influencing precious metals markets even before Trump enacted the latest tariffs. The uncertainty led to a surge in gold and silver prices within the U.S., surpassing international benchmarks. As a result, traders and dealers scrambled to move large quantities of these metals into the U.S. before the tariffs could take full effect. This sudden shift also caused an uptick in lease rates for gold and silver, reflecting the increased cost of borrowing metal stored in London’s vaults.

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Source: moneycontrol‍