Gold hits new record over US-China trade war fears

Gold prices surge to fresh high amid US-China trade war, driven by safe-haven assets demand and economic uncertainty.

Spot gold touched $3,357.40 (£2,540) per ounce on Wednesday, before dropping from its peak. The gold prices has increased by approximately one-third since the start of the year.

The rise come after words from the head of US central bank who said President Donald Trump’s tariff policies may result in economic slowdown, higher prices and unemployment risks. The safe-haven asset is viewed as a safer asset for investors when economic conditions are uncertain.

During the Economic Club of Chicago on Wednesday, Jerome Powell, the Federal Reserve chair said tariff above projections introduced in the past weeks could lead to slow US economic growth and rising cost for consumers.

Mr Jerome Powell delivered his address amid the US-China trade war challenges on global capital market as investors were impacted by the tax changes coming into effect and the escalating the US-China trade war.

Gold is in “full lifeboat mode” as it has become “the most crowded trade on the planet,” said Stephen Innes, head of trading and market strategy at SPI Asset Management. “The dollar is stumbling under the weight of trade-policy whiplash, and portfolio managers have lost faith in anything that involves political discretion,” he added.

Analysts have made comparisons on  this year’s gold rally to the Iranian Revolution more than 40 years in the past, when prices surge by almost 120% from November 1979 to January 1980. Gold exceeded $3,000 an ounce for the first time last month due to concerns over the impact of a global trade war set in.

Jesper Koll from advisory firm Monex Group said gold has attracted investors due to  “a trust hedge against both inflation and government recklessness”. Jesper Koll added that  “Everyone is looking for ‘real’ assets. It’s increasingly clear that Team Trump’s ‘move fast and break things’ approach to policy making will not change.”

The introduction of tariffs by the Trump administration, which are taxes charged on businesses importing goods from overseas, has raised inflation concerns, which has led investors to so-called safe-haven assets like gold. Trump has placed 145% taxes on China since he came back to power in January, and China has responded with a 125% tariff on US imports.

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