Gold prices reached a new milestone on Thursday as equity markets and crude oil prices continued to decline amidst escalating global trade tensions. A “risk-off” sentiment prevailed across the financial markets due to growing economic and political uncertainties, causing investors to shift funds away from riskier assets.
Gold futures on Comex surged by 1.5%, briefly surpassing $3,000 (€2,764) per ounce for the first time in history. Spot gold prices also climbed, jumping 1.9% to reach $2,988 (€2,752) per ounce, marking another all-time high.
Gold has long been considered a safe-haven asset, and its price has risen more than 13% this year, driven by a combination of risk-aversion sentiment, a weakened US dollar, and increasing central bank purchases. The demand for such assets has surged as economic and political uncertainties, particularly those surrounding US President Donald Trump’s tariffs and rising geopolitical tensions, have prompted investors to seek stability.
The global economic outlook has darkened due to escalating tariff threats between the US and other countries. Trump imposed blanket 25% tariffs on steel and aluminium imports, prompting retaliatory measures from Canada and the EU. He also threatened to introduce a 200% tariff on EU wine and other alcoholic beverages in response to the EU’s plan to tax American whiskey imports. This widening trade war is expected to fuel inflation while potentially slowing global economic growth. If the conflict deepens, inflationary pressures could rise, which, combined with a slowdown in growth, may lead to stagflation—a scenario historically favorable for gold as a store of value.
Additionally, a weakened US dollar and expectations for a rate cut by the Federal Reserve have further driven gold’s rally. The US Dollar Index (DXY), which measures the dollar’s value against a basket of major foreign currencies, has fallen more than 5% from its high in mid-January.
Concerns about the US economy are fueling expectations for lower interest rates, and recent cooler-than-expected inflation data has bolstered market predictions that the Federal Reserve could cut rates as early as June, rather than the previously expected September. This, coupled with a weakening dollar, has led to a shift in investor sentiment. However, this trend may reverse if the Federal Reserve takes a more hawkish stance, as continued trade tensions could intensify inflationary pressures.
The euro’s rally has also contributed to the weakening of the US dollar, as optimism surrounding a potential fiscal policy shift within the European Union has prompted investment flows away from US markets.
