Gold prices surged on Monday, rising more than 2% to a three-week high. This increase was driven by a renewed rush to safe-haven assets amid growing uncertainty in global markets due to former US President Donald Trump's plans to impose new tariffs, as well as escalating geopolitical tensions with Iran.
Why do investors turn to gold?
Gold has historically been considered a “safe haven” for investors during times of economic and political turmoil. Unlike paper currencies or stocks, whose value can be heavily influenced by government policies and corporate performance, gold retains its intrinsic value as a finite and physical asset. During periods of stress, such as trade wars or international conflicts, demand for gold increases as a hedge against inflation and financial market volatility, driving its price up.
The context of the trade war and geopolitical tensions
These developments come in the context of President Trump’s “America First” policy, which has led to a wide-ranging trade war, particularly with China. His recent threats to raise temporary tariffs on all US imports from 10% to 15% have fueled concerns about a slowdown in global economic growth. This measure, the maximum allowed under the law, increases uncertainty and makes investors more cautious, thus enhancing gold’s appeal. Simultaneously, ongoing tensions between the US and Iran have contributed to heightened geopolitical risks in the Middle East, an additional factor supporting the price of the precious metal.
Precious metals performance in numbers
In trading details, gold 2% to $1,521.91 per ounce by 8:00 PM GMT. US gold futures (April delivery) also climbed 2.8% to $1,525.60 per ounce. The rally extended to other precious metals, with silver surging 3.2% to $23.87 per ounce, its highest level in over two weeks. Industrial metals, however, saw mixed performance, with platinum slipping slightly 0.7% to $1,040.75, while palladium edged up 0.1% to $1,750.53 per ounce.
Future expectations and market anticipation
Analysts expect gold prices to continue their upward momentum. Jeffrey Christian, managing partner at CBM Group, stated, “There are numerous economic and political issues around the world, and we anticipate a sharp rise in gold prices this week once the Lunar New Year holiday in China concludes and economic activity resumes.” Markets are closely watching for any signals from Federal Reserve spokespeople this week that might clarify the future path of interest rates, as well as any updates on the US-Iran crisis, as these factors will be pivotal in determining the next direction for gold prices.
