Gold prices have witnessed relative stability in global markets, despite a slight decline in recent Asian trading. This stability reflects the continued rise in demand for the precious metal as a safe haven amid rising concerns about trade wars and uncertainty about global economic policies.
Gold has remained close to its all-time highs, maintaining its appeal at a time of heightened global economic tensions. The escalating trade dispute between the United States and China has strengthened investor sentiment toward gold, especially with the imposition of high tariffs by both sides.
The Impact of Exemptions and Political Statements on Markets
Previous sessions saw a limited decline in gold prices following the announcement that Chinese electronic imports would be exempt from US tariffs. This move contributed to a temporary improvement in risk appetite, but the continued threats from the Trump administration to impose further tariffs have mitigated this impact. US President Donald Trump has indicated that additional exemptions may be under consideration. However, the 145% tariffs imposed on China, and the 125% Chinese retaliatory tariffs, remain in place, heightening market anxiety.
Dollar Volatility Supports Gold
The weakness of the dollar has supported gold recently. This decline was a result of a sharp decline in US Treasury yields. Gold is often viewed as a competitor to bonds during times of stress, especially when yields decline.
Spot gold fell 0.4% to $3,224.60 per ounce. Futures, on other hand, were steady at $3,240.85 per ounce, indicating steady demand levels despite market volatility.
Safe-Haven Demand Rises
Prices remained close to a record high of $3,245.69. This situation underscores the continued uncertainty in global markets, especially in light of the trade war, which shows no signs of abating. Demand for gold has increased due to fears of a global economic slowdown, prompting investors to hedge against risk.
Taxes are reshaping the global economic landscape.
Trump’s announcement of a 90-day temporary waiver on some tariffs partially calmed markets. However, his recent statements regarding new tariffs on pharmaceuticals and electronics have rekindled concerns.
Uncertainty remains over the trade relationship between Washington and Beijing. While the United States continues its investigations into sensitive imports, China has so far shown no flexibility. This situation increases the likelihood of an economic recession, according to some analysts.
Other metals react more slowly
Other precious metals recorded limited gains, but they failed to keep pace with gold’s rise. Platinum futures settled at $956.60, while silver futures rose 0.2% to $32.225. Industrial metals were directly affected by trade tensions. Copper prices declined due to expectations of weak demand from China, the world’s largest copper importer.
Recent data indicated that China’s copper imports fell by 1.4% in March. These declines are attributed to anticipation over tariffs, which has prompted some exporters to expedite shipments to the United States before any new measures are implemented.
Investor movements reveal their confidence in gold
Many investors are turning to gold, viewing it as an asset that preserves value during times of volatility. Analyst Morrison noted that technical indicators show gold has returned to overbought levels, which warrants caution.
This trend reveals a temporary loss of confidence in other investment instruments, such as Treasury bonds. These bonds, once considered the primary safe haven, have recently shown unusual volatility.
US policies confuse markets
The US Federal Register has opened new filings aimed at imposing tariffs on pharmaceuticals and semiconductors. Officials believe that over-reliance on imports in these sectors poses a national security risk.
Separately, Trump has indicated the possibility of modifying tariffs on cars and their components from Canada and Mexico. This policy shift could restructure supply chains, with a direct impact on prices and production.
The impact of interest rates on gold’s attractiveness
The president of the Atlanta Federal Reserve stated that the US economy is at a “significant standstill” due to uncertainties surrounding trade policy. He stressed the need to keep interest rates unchanged until the picture becomes clearer. However, market expectations indicate a possible rate hold at the next meeting. There are even bets on future cuts, potentially as high as 85 basis points by the end of 2025. However, some analysts believe that persistent inflation may prevent the Fed from making bold decisions. However, if trade tensions intensify, the Fed may be forced to intervene to calm the markets.
Will gold continue to rise?
In the current situation, gold is likely to maintain its position as a defensive asset. Declining confidence in economic policies and uncertainty regarding tariffs are all factors that are driving investors to buy gold.
As volatility in Treasury bonds continues, the market is reconsidering their safe haven status. This could help strengthen gold’s position in global investment portfolios.
History suggests that gold thrives in times of instability. With geopolitical and economic tensions lingering, gold is expected to continue its strong performance in the short term, at least until the contours of US trade policy become clearer.
Gold Under Trump’s Tariffs
Federal Register filings revealed on Monday that the United States has launched investigations into pharmaceutical and semiconductor imports. The goal is to potentially impose tariffs on these sectors, citing the heavy reliance on foreign production of pharmaceuticals and chips as a national security risk.
Market participants are concerned after US President Donald Trump announced plans to unveil tariff rates on imported semiconductors next week. Additionally, Trump announced on Monday that he is open to adjusting the 25% tariffs on imported cars and auto parts from Mexico, Canada, and other countries.
Interest Rates, US Treasuries, and Gold
Atlanta Federal Reserve Bank President Raphael Bousik said that uncertainty surrounding tariffs and other policies has caused the economy to enter a “significant pause.” He indicated that the U.S. central bank should maintain its current stance until the picture becomes clearer.
Meanwhile, markets shrugged off comments from Atlanta Federal Reserve Bank President Raphael Bousik, who suggested that the U.S. central bank should keep interest rates unchanged until the picture becomes clearer, Mehta said. Markets had priced in an 80% chance that the Fed would keep rates unchanged at its May 7 policy meeting. They also priced in about 85 basis points of rate cuts by December 2025.
U.S. Treasuries and Gold
Gold, a non-yielding asset, has traditionally been used as a hedge against global uncertainty and inflation. It also tends to thrive in a low interest rate environment. Morrison said this has been exacerbated by some erratic movements in the U.S. Treasury market. Backed by the balance sheet of the world’s largest economy and the strength of the global reserve currency, US Treasuries have always been considered the ultimate safe haven. Investors not only receive interest, but also enjoy the assurance of supporting the US economy. Morrison added, “But Treasuries have proven to be extremely volatile recently and have lost some of their appeal.”
