Gold Hits Record High as U.S.-China Trade War Remains
Gold rose to a record high, after rising nearly 1% in the previous session, as the initial flare-up in the U.S.-China trade war stoked demand for the haven asset.
Bullion hit an all-time high above $2,861 an ounce on Wednesday (February 5). That came after President Donald Trump imposed 10% tariffs on Chinese imports the day before, prompting swift but more targeted retaliation from Beijing.
The response from China has been relatively muted compared with Trump’s first term, when Beijing retaliated with nearly equal tariffs from the U.S., but concerns remain about the impact on the world’s two largest economies. Markets are also waiting to see if there will be a ripple effect for U.S. monetary policy if the tariffs rekindle inflation. Adding to the uncertain outlook, Trump suggested that the U.S. take over the Gaza Strip and assume responsibility for rebuilding the war-torn territory during a news conference with Israeli Prime Minister Benjamin Netanyahu. The precious metal will benefit from the increased leeway about what’s to come, although it could lose some of its luster if interest rates remain high.
The dollar gauge fell, extending losses following Tuesday’s U.S. jobs report that showed a gradual slowdown in the labor market. A weaker greenback makes commodities like gold cheaper for most buyers.
“Who doesn’t like a safe haven in this scenario?,” said Charu Chanana, a strategist at Saxo Capital Markets Pte., “No good news on the U.S.-China talks and more geopolitical jitters with the Gaza news will continue to provide further support for gold, regardless of which way the U.S. dollar moves.”
Spot gold rose 0.7% to $2,861.22 an ounce by 6:29 a.m. in London. The Bloomberg Dollar Spot Index fell 0.1%, after a 0.7% loss on Tuesday. Silver and platinum rose, while palladium fell.
Trade war fears had been roiling precious metals markets even before Trump went ahead with tariffs on China. U.S. gold and silver prices have surged above international benchmarks in recent weeks, prompting dealers and traders to rush large amounts of the metal into the U.S. before the tariffs take effect. The chaos has also led to a spike in rental rates for gold and silver — the returns that holders of the metal in London vaults can earn by lending it out for short periods.
Source: Bloomberg
