Gold hits record high amid escalating US-China trade war, dollar declines

Gold

Gold prices surged nearly 3% to an all-time high on Thursday as investors turned to yellow metal amid declining dollar and an escalating trade war between the U.S. and China.

The prices of spot gold rose 2.8% to $3,168.26 an ounce at 11:32 a.m. ET (1532 GMT), after reaching a record high of $3,171.49 earlier in the session while U.S. gold futures climbed 3.5% to $3,185.50.

Earlier on Wednesday, U.S. President Donald Trump announced a pause on lower hefty duties on dozens of countries, but increased the tariff on China to 125% from 104%.

"Gold regains its safe-haven appeal and gets back on track for new all-time highs," said Nikos Tzabouras, Senior Market Analyst at Tradu.com.

"However, prospects of deals with trading partners pose a significant risk to gold's upside potential, as they could renew pressure on the metal. Additionally, headwinds may arise from pared-back Fed rate cut bets that can strengthen the dollar," Tzabouras added.

Meanwhile, the dollar index dropped more than 1%, making gold less expensive for other currency holders.

Additionally, data on Thursday showed U.S. consumer prices fell in March, but inflation risks are tilted to the upside after Trump doubled down on China tariffs.

Traders now are expecting that the U.S. Federal Reserve will resume cutting interest rates in June and probably reduce its policy rate by a full percentage point by the end of the year.

"We see central banks buying (gold), so as long as we see inflows into ETFs and more of the monetary policy risks, there's a lot of key drivers that will continue to support gold," said Alex Ebkarian, chief operating officer at Allegiance Gold.