Spot gold edged down by 0.1% to $3,338.81 per ounce as of 0436 GMT, after hitting a peak of $3,357.40 earlier in the day. Despite this minor pullback, bullion has recorded a gain of over 3% so far this week, underscoring the strong underlying demand. Meanwhile, U.S. gold futures showed a slight upward trend, firming by 0.1% to $3,351.
Market analysts suggest that the current environment is highly favorable for gold. Nikos Tzabouras, a senior market analyst at Tradu.com, noted, "Everything is going gold's way, propelling prices to fresh highs. Although pullbacks are reasonable, the precious metal is poised for further gains as trade bedlam continues."
The recent spike in trade tensions was triggered by a further escalation in the dispute involving the United States and its trade partners. On Tuesday, U.S. President Donald Trump ordered an investigation into potential new tariffs on all critical minerals imports. This action comes on top of existing reviews into pharmaceutical and chip imports, signaling a hardening stance on trade.
Beijing responded to these developments by reportedly ordering airlines to halt further deliveries of Boeing aircraft, further exacerbating the already strained relationship between the two economic giants.
According to Tzabouras, the ongoing "Sino-Western tensions show no signs of easing," and this is having a direct impact on the U.S. dollar. He argues that "the dollar has become a casualty of Trump's trade policies, with its role as a safe haven now questioned further, strengthening gold's appeal."
The dollar index, which measures the greenback against a basket of major currencies, has been hovering near a three-year low reached last week. This weakness in the dollar makes gold, which is priced in dollars, more attractive for investors holding other currencies, as it becomes relatively cheaper for them to purchase.
Adding to the allure of gold is the current volatility observed in both the equity and bond markets. Trevor Yates, an analyst at Global X, explained that "the volatility in both the equity and bond markets could also push investors to increase the weighting of gold within their portfolio," as they seek safer and more stable investment options during times of economic uncertainty.
Gold has traditionally been viewed as a reliable hedge against political and economic uncertainty, as well as inflation. Its performance this year reflects this sentiment, with the precious metal having risen by more than 27% since the beginning of the year.
Looking ahead, analysts at ANZ maintain a bullish outlook on gold, although they anticipate the possibility of a temporary price correction. They stated, "We maintain our bullish stance on gold, though a pull-back towards $3,050 per ounce looks possible after a recent swift price rally." This suggests that while the long-term trend for gold is seen as positive, short-term profit-taking or market adjustments could lead to a temporary dip in prices.
In the broader precious metals market, spot silver experienced a decline of 0.6% to $32.54 per ounce, while platinum shed 0.4% to $963.15. Palladium also saw a significant drop, falling by 1.4% to $958.24 per ounce. These movements indicate a mixed performance across the precious metals complex, with gold's safe-haven appeal currently dominating market sentiment.
In conclusion, gold prices reached a new all-time high before experiencing a slight retreat as investors took profits. The primary drivers behind this surge remain the escalating trade tensions between the US and China, coupled with a weakening dollar and volatility in other financial markets. While some analysts predict a potential short-term pullback, the overall outlook for gold remains positive, supported by its traditional role as a safe haven in times of economic and geopolitical uncertainty.