Fears of trade conflict, high U. S. debt and safe-haven demand drove gold prices to new highs
Gold prices hit an all-time high yesterday, boosted by concerns about the risk of trade conflict over US tariffs and falling US dollar and treasury yields. Spot gold was up 0.2 per cent at $2,848.69 an ounce at press time, having earlier hit an all-time high of $2,853.97. U. S. Gold Futures Rose 0.2 percent to $2,879.70. At the same time, domestic gold jewelry prices also rose, Chow Tai Fook Enterprises, Chow Sang Sang and other major jewelry brands announced on the 5th the price of gold are more than 863 yuan per gram ($3325 per ounce) .
Gold Futures on the New York Mercantile Exchange rose to $2,865.50 an ounce Monday on a screen in Shanghai.
Markets reacted strongly to the escalating tensions
“The market reacted strongly to the escalating tensions, which overshadowed the impact of other economic data,” said Bob Haberkorn, senior market strategist at RJO Futures. The Chinese were quick to respond to Donald Trump’s announcement on Monday that the US would impose tariffs on imports from Canada, Mexico and China. Although Donald Trump put Mexican and Canadian tariff plans on hold, the risk of a trade conflict between the two largest economies drove haven demand. Meanwhile, the dollar’s 0.5 per cent fall this week has made gold more attractive to foreign investors, adding to the rally.
Gold has long been seen as a haven against inflation and geopolitical uncertainty. “In a high-risk environment, the appeal of physical gold and silver becomes more apparent as they eliminate counterparty risk and provide a reliable store of value.”. Ebkarian, chief operating officer of Allegiance Gold, a physical precious metals trader, said prices could continue to rise because of market uncertainty.
“Both foreign central banks and retail investors are pushing gold higher,” the Barron’s said Thursday, citing data from the world gold council at the end of last year, poland, Turkey, India and China are major buyers of gold. In the nine months before the 2024, central banks bought 694 tonnes. The People’s Bank of China announced in November that it would resume buying gold after a six-month hiatus. Jim Wykoff, senior market analyst at Kitco Metals, said that given the current uncertainty in the market caused by U.S. policy and the possibility that central banks around the world may increase their gold purchases to diversify their dollar holdings, gold could hit $3,000 an ounce this year.
“People can’t get their hands on Gold because a lot of it has been shipped to New York and the rest is still waiting in the queue,” he said, led to a shortage of gold in London. Comex gold stocks surged 36 per cent this month to 244 tonnes, the highest monthly inflow since the peak of the outbreak in May 2020, the report said. Global precious metals banks are shipping gold from trading hubs in Asian consumer markets, such as Dubai and Hong Kong, to the US to take advantage of an abnormal premium in US gold futures prices over spot prices.
Reports that Trump plans to impose tariffs on US gold imports have pushed futures prices on the New York mercantile exchange well above spot prices, creating a lucrative arbitrage opportunity. “Almost all the banks are jumping at the opportunity-shipping gold to the US for delivery to Comex in order to make an arbitrage profit.”
Many states in the United States have declared gold a currency
Concerns about rising US government debt also helped gold to its biggest annual gain since 2010. Henrik Marxism, head of global precious metals trading at Heraeus, told the Financial Times that Donald Trump’s second term could also support gold prices. “Whatever he announces will increase debt, leading to a weaker dollar and higher inflation. This is usually good for gold.”
Xu Weihong, chief economist of the China Institute for the transformation of inventions, said in an interview with the Global Times on the 5th that excessive issuance of US dollars was the main factor supporting gold going higher all the way. In the long run, after the United States subprime mortgage crisis of 2008, the Fed merely printed money to solve the crisis without reforming the financial system on the supply side, and in the short to medium term, the purchasing power of the U. S. dollar has fallen as recent presidents have stimulated the economy by piling on ever-larger amounts of debt for votes.
Within the United States, a growing number of states have shaken their faith in the dollar, announcing that gold and silver will become legal tender on a par with the dollar to pay off U.S. debt and taxes, in response to the risk of uncertainty, such as a decline in the purchasing power of the dollar and inflation.
The idea of“Sound money”– using gold and silver — has been popular in many states for more than a decade, Forbes reported. Starting in Utah in 2011, state after state removed barriers and impediments to the use of gold and silver, as well as gold-and silver-based digital currencies or other alternatives. Kentucky, for example, exempted sales tax on gold and silver.
At present, 47 states have formally declared independence in the monetary system, giving gold and silver equal status with the dollar. Some states have also exempted gold and silver transactions from capital gains tax. Since the 2024,16 states have announced moves to replace the dollar with gold, while South Carolina and Hawaii are also speeding up legislation to eliminate capital gains taxes on gold transactions.
Gold’s rally could continue
According to Hong Kong’s South China Morning Post, analysts at Soochow Securities said the stock market shock triggered by Chinese artificial intelligence start-up DeepSeek had at one point led to a sell-off in many US tech stocks, it has also increased investor demand for safe havens such as gold. On January 27 alone, the NASDAQ composite index fell more than 3 per cent, led by Chipmaker Nvidia, down 17 per cent, reinforcing the trend of foreign investors pulling out of dollar-denominated assets. “In the longer term, DeepSeek’s challenge to the dollar’s technical dominance may be just beginning. The trend of de-dollarization is expected to provide long-term stable support for gold, pushing its price up,” added analysts at Soochow Securities.
Moreover, with trade tensions showing no signs of easing and the risk of inflation looming in the U.S. , some analysts think gold could have more room to rally. Xu Weihong told reporters that the financial markets judged that Donald Trump’s early term may also increase the fiscal stimulus, resulting in gold prices continue to strengthen trend.