Safe-haven demand triggered by tariff threats pushes spot gold to a record high
Uncertainty increased market safe-haven demand after US President Trump issued new tariff threats, pushing gold prices to a record high on Wednesday.
Time:
2025-02-21 07:51
Following new tariff threats from US President Trump, uncertainty increased market safe-haven demand, pushing gold prices to a record high on Wednesday.
During the European trading session, spot gold rose 0.3% to $2944 per ounce, earlier surging to a record high of $2946.75 per ounce. This marks the ninth time this year that gold has hit a record high. Meanwhile, COMEX gold futures rose 0.46% to $2962 per ounce, also nearing a new high.
OANDA market analyst Zain Vawda stated: "The rise in gold prices seems to be driven by Trump's comments about impending tariffs on automobiles and pharmaceuticals, which could pave the way for gold to break through the $3000 mark."
Since taking office, Trump has frequently issued threats of additional tariffs. After announcing last week that he would impose a 25% tariff on imported steel and aluminum, he stated on Tuesday that he is considering imposing a 25% or higher tariff on automobiles, semiconductors, and pharmaceutical products.
Trump said tariffs would be "around 25%" and indicated that tariffs would "increase significantly this year." Trump hinted at a phased implementation period, saying he wanted to give businesses time to return to the United States. He said he would allow businesses "a little bit of a chance" to move production back to the US, but offered no details.
UBS analyst Giovanni Staunovo said: "I don't think central banks will stop buying gold in the short term, but rather expect them to continue buying gold heavily, thus supporting gold prices."
Gold is a classic safe-haven asset, typically favored by investors during economic instability, geopolitical tension, or rising inflation expectations. However, interest rate changes can significantly impact its attractiveness.
Meanwhile, the market is also watching the direction of the Federal Reserve's monetary policy, with the minutes of its January policy meeting to be released later today. Vawda believes that even if the Fed's meeting minutes are negative for gold, the impact will be relatively short-lived.
In addition, Goldman Sachs analysts, led by Lina Thomas, have raised their year-end target price for gold from $2890 to $3100.
Given the highly uncertain macroeconomic environment, coupled with a continued lack of positions, investors remain bullish on gold, meaning there is significant upside potential for gold holdings. The Goldman Sachs team said that if policy uncertainty remains high, gold prices could even rise to $3300.
UBS strategist Joni Teves points out that for investors, long-term themes such as the depreciation of the US dollar, further deterioration of the US fiscal deficit, and geopolitical risks should continue to attract interest in gold as an alternative asset, leading to its inclusion in investment portfolios.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.