Gold prices jumped over 6.5 percent this week, reaching a record high of $3,237 per troy ounce by Friday. The sudden jump is the metal's strongest performance since the initial stages of the Covid-19 pandemic, as global investors respond to increasing economic uncertainty fuelled by US President Donald Trump's broad new tariffs, the Financial Times reported.
Markets spin out of control as investors lose confidence in US Treasuries and the dollar
The trade war turmoil has created a broad sell-off in US stocks and Treasury bonds — both traditional safe havens. The dollar dropped to a three-year low against the euro, causing investors to flee American assets and find refuge in gold, which usually does well during currency weakness.
Trade war escalation fuels market anxiety
Beijing struck back on Friday with a 125 percent tariff on US imports, spurring concerns of a full-fledged trade war. According to analysts, this news has sent investor sentiment into overdrive, leading them to buy gold as a bet against recession threats, increased bond yields, and financial instability.
Demand is led by central banks and ETFs
Investor appetite is being met by robust institutional and central bank demand. First-quarter inflows into gold-backed ETFs were the largest since 2020, and central banks — especially in emerging markets — have been accumulating physical gold to diversify out of the dollar.
China is at the forefront of physical buying of gold
Domestic demand in China has surged so much that purchases are being made at premiums above global spot prices — a stark sign of heightened demand for the metal. The trend is pointing to increased anxiety in Asian markets about instability in the financial system.
UBS raises forecast as momentum gains pace
In response to increased demand from central banks and institutions, UBS has increased its 12-month gold forecast to $3,500 an ounce. This is the bank's second upward revision in its forecast this year, reflecting the fast-changing investor environment.
Gold becomes the new anchor of stability
With the dollar and Treasuries no longer holding their historic allure and geopolitical threats increasing, experts assert gold has resumed its role as the safe haven of choice. As doubts over Trump's trade policies keep on rising, investors seem set to continue dumping money into bullion over the coming months.
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