Gold prices hit a historic high, surpassing $3,200 per ounce during Asian trading on Friday morning. This rise came amid growing fears of a full-blown trade war between the United States and China. Investors turned to gold and the Japanese yen for safety amid violent volatility in financial markets. A weaker US dollar contributed to the yellow metal’s gains against other global currencies.
Market Movements Drive Gold prices
Spot gold futures rose more than 1% to $3,220.20 per ounce, a record high. June futures rose 1.7% to $3,231.69. Despite rising US bond yields, demand for gold remained strong due to global market turmoil.
US-China Trade Escalation Boosts Gold
This week saw an exchange of tariffs between China and the US, increasing investor anxiety. The United States imposed new tariffs of 145% on some Chinese imports. China responded with retaliatory tariffs of 84%, causing turmoil in global financial markets. Despite the tension, Trump announced his desire to resume trade talks with China, but Beijing showed no clear response.
Dollar Weakening, Gold prices Benefiting
Investors gradually abandoned the dollar and Treasuries in favor of gold, seeking a more stable safe haven. US inflation data showed a marked slowdown, increasing expectations of interest rate cuts in the near future. As a result, gold’s value as a hedge against inflation and a weaker US currency strengthened.
Other Metals Post Mixed Performance
Silver and platinum prices rose on Friday, but remained behind gold in overall performance. Platinum futures rose 0.5% to $935.75 per ounce, while silver rose 1.6% to $31,245, supported by the same factors that lifted gold.
An Unconventional Year for Gold prices: Continued Rally Despite Obstacles
Gold reached $3,000 for the first time in history in March 2025 and has maintained its strong position ever since. Despite this strong performance, gold faced some challenges throughout the year, especially in November. Gold fell 7% after Donald Trump won the presidency, driven by a stronger dollar and rising bond yields.
The Dollar and Politics Influence Gold prices Movements
Investors at the time believed that Trump’s policies would revive the US economy, increasing the dollar’s appeal. The US saw a large influx of foreign investment, temporarily strengthening the national currency. However, concerns about the fiscal deficit later returned, causing yields to rise and gold to decline again.
How do markets view Trump’s new policy?
The Trump administration favors a weaker dollar to stimulate exports and reduce the burden of public debt. This trend has been reinforced by the increasing likelihood of lower interest rates and lower bond yields. As this approach continues, gold may continue to rise as a defensive asset against inflation and risk.
Tariffs a Key Factor in Gold’s Future
Tariffs often increase inflation and slow economic growth, boosting demand for gold. Uncertainty about the timing and duration of these tariffs is also increasing investor anxiety. Gold is often used as a risk mitigator in this type of political and economic uncertainty.
Central Banks Accumulate Gold as a Strategic Asset
Central banks have continued to buy gold at a record pace over the past few years, especially since 2022. These institutions have sought to diversify their reserves and reduce their dependence on US dollar.
US Global Policies Push Others to Gold
The United States has strengthened its influence by using the dollar as an economic weapon, particularly after invasion of Ukraine. In response, many countries have chosen to bolster their gold reserves at the expense of the dollar.
Does gold deserve a permanent place in your investment portfolio?
Gold is not just a precious metal; it is considered one of the oldest defensive assets in history. In times of geopolitical tension, economic volatility, or even during inflation crises, investors turn to gold as a “safe haven.”
Why is gold preferred in investment portfolios?
Hedging against inflation: When prices rise and purchasing power erodes, gold maintains its value.
Portfolio diversification: Gold does not always move in the same direction as stocks or currencies, making it an excellent tool for reducing risk.
Protection against market volatility: In times of crisis (such as wars or financial collapses), the price of gold often rises.
Increasing institutional demand: Central banks around the world add gold to their reserves, boosting demand.
Limited supply: Unlike paper currencies, gold cannot be printed. This makes it a scarce asset that maintains its value over time.
Is investing in Gold alone enough?
Despite its benefits, it is not recommended to make gold the sole component of a portfolio. It does not generate income (such as dividends or interest), but rather relies on a rising price to generate profit. However, having 5% to 15% of gold in a diversified portfolio is a wise choice, especially during times of uncertainty.
Gold and Copper prices : Divergent Trends in Focus
While gold continued its upward trend, copper experienced extreme volatility due to trade tensions. Despite rising 0.6% on Friday, copper has suffered sharp losses in recent weeks. The price of copper reached $8,959.80 per ton on the London Stock Exchange.
Base Metals Outlook
Copper’s performance reflects growing concerns about slowing global growth due to trade wars. These expectations have negatively impacted the prices of other industrial commodities, such as oil and iron. Conversely, gold continues to strengthen its position, benefiting from its role as a store of value during times of crisis.
