Gold prices have surged to new all-time highs, reaching $2,930 per ounce for spot gold, while futures prices are approaching $2,955. This rally has been fueled by rising global uncertainties, particularly U.S. President Donald Trump’s recent decision to impose a 25% tariff on all imported steel and aluminum. This move has heightened concerns about a potential trade war, driving investors towards gold as a safe-haven asset. Year-to-date, gold has risen by 11%, reflecting increased demand as geopolitical and economic risks escalate.
Trump’s Tariffs Spark Global Economic Fears
On February 10, Trump signed an executive order imposing a 25% tariff on steel and aluminum imports, with no exceptions or exemptions. This is part of his broader plan to implement additional tariffs on other sectors, including automobiles, chips, and pharmaceuticals. His policies are seen as unpredictable, targeting both allies and adversaries alike, which has amplified fears about the future of global trade and economic stability.
As a result, gold’s role as a store of value during uncertain times has gained further prominence. Richard Franulovich, an analyst at Westpac Bank, noted that Trump’s tariffs and the increased risks to the global economy have spurred a growing demand for gold. Investors are flocking to the precious metal as a hedge against potential economic downturns and rising inflation.
Market Focus Shifts to Powell’s Testimony on U.S. Monetary Policy
The market’s attention is now shifting towards Federal Reserve Chairman Jerome Powell’s upcoming testimony in Congress. Powell will discuss the U.S. economic outlook and the Fed’s future interest rate policy. His remarks are highly anticipated, as analysts look for signs of how the Fed will respond to potential inflationary pressures stemming from Trump’s trade policies.
Powell has previously indicated that the Fed is not in a hurry to lower interest rates further, given the strength of the U.S. economy. However, analysts are closely watching for any signals that could suggest a shift in monetary policy, which could influence gold prices. The market expects Powell to highlight the resilience of the economy, particularly in the face of ongoing trade and policy uncertainties.
Gold Demand to Remain Strong in 2025
According to the World Gold Council’s recent report, global gold demand is expected to hit new record levels in 2024, driven by strong central bank purchases and rising investment demand. In 2024, global central banks are expected to purchase over 1,000 tons of gold for the third consecutive year. Investment demand for gold is also anticipated to increase by 25% year-on-year, reaching 1,180 tons.
The report suggests that geopolitical and macroeconomic uncertainties will continue to support gold’s demand as a store of wealth and a hedge against volatility. In 2025, central bank gold purchases are expected to remain a key driver, with demand for gold ETFs also playing a significant role.
Institutional Forecasts Predict Continued Growth in Gold Prices
Several major financial institutions are optimistic about the future of gold prices. UBS recently raised its 12-month gold price forecast to $3,000 per ounce, citing gold’s enduring appeal as a hedge against uncertainty. Citigroup also adjusted its gold price targets, raising its short-term forecast to $3,000 per ounce and increasing its average price projection for 2025 to $2,900 per ounce.
Goldman Sachs has also set a price target of $3,000 per ounce, with analysts predicting that continued geopolitical and economic uncertainties will drive long-term demand for gold from both central banks and investors.
Conclusion
In conclusion, gold prices are expected to continue their upward trajectory, driven by global economic uncertainty, trade tensions, and ongoing demand from central banks. As geopolitical risks and inflationary concerns persist, gold remains a key safe-haven asset for investors. With institutions forecasting further price gains, gold’s role as a store of value is likely to remain strong, possibly pushing prices towards the $3,000 mark in the near future. The market will closely monitor the Fed’s policy stance and any developments in global trade relations as key factors influencing gold’s performance in the coming months.