Gold reaches a new milestone as global trade war escalates
14.03.2025 - 05:33
/ euronews.com
/ Donald Trump
Gold prices reached a new high on Thursday, with gold futures at Comex surging 1.5%, briefly surpassing a new milestone of $3,000 (€2,764) per ounce for the first time in history. Spot gold prices jumped 1.9% to $2,988 (€2,752) per ounce, making another all-time high.
Gold is seen as a typical haven asset, with its prices rising more than 13% this year amid risk-aversion sentiment, a weakened US dollar, and increasing central bank purchases.
Demand for safe-haven assets surged amid economic and political uncertainties surrounding Trump’s tariffs and rising geopolitical tensions. The global economic outlook has darkened due to escalating tit-for-tat tariff threats between the US and other countries.
US President Donald Trump imposed blanket 25% tariffs on steel and aluminium imports, triggering retaliatory measures from Canada and the EU. He also threatened to impose a 200% tariff on EU wine and other alcoholic beverages in response to the bloc’s plan to tax American whiskey imports. While the widening trade war is expected to fuel inflation, higher trade barriers and deglobalisation could slow global economic growth.
A deepening trade conflict may further exacerbate inflationary pressures while weakening economic growth, creating the conditions for stagflation—a scenario historically favourable for gold as a store of value.
Additionally, a weakened US dollar and expectations for a sooner Federal Reserve rate cut also fuelled gold’s rally. The US Dollar Index (DXY), which measures the value of the US dollar relative to a basket of major foreign currencies, has declined more than 5% from its yearly high in mid-January.
Concerns about the US economy are likely to lead to lower interest rates, and recent cooler-than-expected inflation data has reinforced market expectations for a rate cut in June, rather than the previously projected September. The dollar may continue to weaken against other G10 currencies as investor sentiment shifts. However, this trend may not persist if the Federal Reserve maintains a hawkish stance, as escalating trade tensions could exacerbate inflationary pressures.
Meanwhile, the euro’s rally has also weighed on the US dollar, amid optimism surrounding a potential fiscal policy shift within the European Union, prompting investment flows away from US markets.
Central banks have been increasing their gold reserves while reducing holdings of US government bonds. Trump’s tariffs and fiscal policies aimed at reducing the government deficit have raised concerns about the US’s ability to service its debt.
“Trump's trade and tax policies are driving flows into gold as central banks look to shift reserves away from Treasuries, while there are fears about the rising US debt load and the US economy's