Gold Touches Fresh Record High on Fed Easing Bets, Haven Demand
Gold touched a new record high after modest US inflation numbers supported the case for Federal Reserve easing soon and escalating trade tensions stoked safe haven buying.
The latest US data showed wholesale inflation stagnated in February thanks to a sharp decline in trade margins, according to a Bureau of Labor Statistics report released Thursday. This coupled with lower-than-expected consumer price index released Wednesday reinforced expectations that the US central bank may lower borrowing costs in the near future.
The reports “suggest that demand is moderating due to confidence erosion, leaving an opening for less restrictive policy,” said Bart Melek, global head of commodity strategy at TD Securities. “Gold is behaving like a hedge asset, moving in the opposite direction to risk assets such as equities.”
Swap traders are fully pricing in another quarter-point rate reduction in June, with about 70 basis points of easing seen for all of 2025. Lower borrowing costs tend to benefit gold, which doesn’t pay interest.
The back-and-forth in US President Donald Trump’s tariff measures has caused large swings in stocks and kept investors on edge. On Thursday, he threatened to impose a 200% tariff on wine, champagne and other alcoholic beverages from France and elsewhere in the European Union, the latest escalation in a brewing transatlantic trade war. This came after immediate retaliations from the EU and Canada after the White House rolled out promised 25% tariffs on steel and aluminum imports the prior day.
Source : Bloomberg
