Gold Hits a Record High Amid Increasing Trade War Tensions

Investor anxiety over the growing trade war between the US and China has caused gold prices to soar to all-time highs. Prior to a minor decline, spot gold reached an all-time high of $3,357.40 (£2,540) per ounce on Wednesday. Since the start of the year, the precious metal has experienced an impressive gain of almost 30%.

Jerome Powell, the chair of the Federal Reserve, warned that the recent tariff measures implemented by the US administration are likely to impede economic growth and raise consumer costs, which prompted this sharp price increase.

Powell stressed that the aggressive trade policies, especially the steep increases in import duties, pose serious risks to the economic outlook while speaking to the Economic Club of Chicago. His comments came after weeks of market turbulence as investors responded to escalating tensions and reciprocal tariffs between the two biggest economies in the world.

Gold Is a Safe Haven for Investors in an Uncertain World

When the market is stressed, gold, which has historically been a safe haven, is going through what some analysts are referring to as a "lifeboat effect." Gold has become "the most crowded trade on the planet" in the current climate, according to Stephen Innes, Managing Partner at SPI Asset Management. He continued by saying that many portfolio managers are pulling back from politically influenced assets as a result of the US dollar's decline due to the pressure of unpredictable changes in trade policy.

The price explosion during the Iranian Revolution, when gold values nearly doubled in a few months between late 1979 and early 1980, has been compared to this year's gold rally by analysts.

Last month, the $3,000 per ounce milestone was first reached, indicating a wider shift in investor preferences toward physical assets in the face of escalating geopolitical unrest. According to Jesper Koll of Monex Group, gold is currently seen as a hedge against both inflation and erratic governmental policies. In reference to worries about the policy volatility of the US administration, he stated, "Investors are turning to real assets." "The current strategy of breaking things and moving quickly doesn't inspire long-term confidence."

The Escalation of the Trade War Increases Market Volatility

President Trump has reinstated a number of aggressive tariffs on Chinese imports since taking office again in January, with rates as high as 145%. China has responded by imposing its own retaliatory tariffs on American goods, which can reach 125%. Global supply chains have been disrupted, and concerns about rising inflation have increased as a result of the situation.

The future of additional duties on goods from other nations is uncertain as they are still being reviewed after a 90-day pause. Financial markets are not convinced by the Trump administration's claims that these protectionist policies will increase federal tax revenue, create jobs, and revive domestic manufacturing.

Gold's status as the preferred asset during tumultuous times is further supported by the fact that investors are still pouring money into it.