Gold prices surged to a record high on Wednesday as tensions between the United States and China escalated, triggering fears of a full-scale trade war. The rise came after Beijing imposed new tariffs on U.S. imports in retaliation to Washington’s duties on Chinese goods.
As of 0253 GMT, spot gold was trading 0.2% higher at $2,848.69 per ounce, after hitting a historic peak of $2,853.97 earlier in the session. U.S. gold futures also climbed 0.2% to $2,879.70 per ounce.
Trade War Fuels Safe-Haven Demand
The latest developments in the U.S.-China trade war have driven investors toward safe-haven assets like gold. On Tuesday, U.S. President Donald Trump stated that he was in no rush to engage in talks with Chinese President Xi Jinping to resolve trade tensions. Following this, China imposed fresh tariffs on U.S. goods and issued warnings to American companies, including Google, about potential sanctions.
According to Ilya Spivak, head of global macro at Tastylive, the next key level for gold prices could be $3,000 per ounce if tensions continue. He also suggested that China may increase gold purchases for its reserves as a response to economic uncertainty.
Interest Rate Concerns and Inflation Risks
The Federal Reserve has also raised concerns about the impact of trade tariffs on inflation. Three Fed officials warned on Monday that the uncertainty over pricing could slow down the pace of interest rate cuts.
Gold is traditionally viewed as an inflation hedge, but higher interest rates can reduce its appeal, as they increase the opportunity cost of holding non-yielding assets like gold.
Market Focus on Key Economic Data
Investors are closely monitoring key U.S. economic indicators this week, including the ADP employment report at 1315 GMT and the U.S. payrolls report on Friday. These reports could provide further insights into the health of the U.S. economy and influence gold price movements.
Other Precious Metals React to Gold’s Surge
Gold’s rally has had a mixed impact on other precious metals.
- Spot silver rose 0.2% to $32.15 per ounce.
- Platinum gained 0.3% to $966.95 per ounce.
- Palladium, however, declined 0.9% to $981.75 per ounce.
While gold remains the top choice for investors seeking safety, other metals have underperformed due to their sensitivity to market risk appetite, according to Spivak.
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