Gold prices rose by a notable 1% during today's trading session, as investors flocked to the precious metal as a safe haven amid the prevailing uncertainty in global markets. This increase was driven by a combination of factors, most notably the ambiguity surrounding US trade policy and the continued escalation of global geopolitical tensions.
Gold as a safe haven in times of turmoil
Historically, investors have turned to gold as a hedge and a safe haven during periods of economic and political volatility. Unlike other assets such as stocks and currencies, which are directly affected by government decisions and corporate performance, gold retains its intrinsic value as a physical asset with a limited supply. This role is particularly amplified when market uncertainty prevails, as investors tend to reduce risk in their portfolios by increasing their holdings of the precious metal.
Impact of US trade and monetary policies
Uncertainty surrounding US tariff policy is a major driver of this surge. Following court rulings and conflicting statements from officials, investors have found themselves uncertain about the future direction of global trade. This uncertainty is prompting them to seek more stable investments, with gold being a prime candidate. Kyle Rodda, senior market analyst at Capital.com, noted that “the return of activity to the Chinese market, coupled with increasing political uncertainty in the US, is supporting gold’s appeal.”.
In addition to trade policy, the Federal Reserve's (the US central bank) monetary policy outlook plays a crucial role. Although Fed officials have not provided clear guidance on adjusting interest rates soon, markets are already pricing in the possibility of future cuts. Lower interest rates reduce the opportunity cost of holding gold, which does not yield interest, making it more attractive compared to bonds and other interest-bearing assets.
Geopolitical tensions increase the luster of the yellow metal
Escalating geopolitical tensions in various parts of the world, particularly in the Middle East, are contributing to increased demand for gold. Statements by US President Donald Trump, hinting at potential action against Iran to prevent it from acquiring nuclear weapons, have added a new layer of risk to the markets. These developments, coinciding with anticipated nuclear talks, are increasing uncertainty and driving investors toward safe-haven assets.
Performance of other precious metals
The positive momentum wasn't limited to gold alone; it extended to other precious metals. Silver jumped 3%, reaching its highest level in three weeks. Platinum climbed 3.6%, and palladium rose 2.4%, reflecting a broader wave of optimism in the precious metals sector driven by the same factors supporting gold.
