Gold prices broke through the critical $3,200 per ounce level on Friday, driven by a weakening dollar and escalating trade tensions, prompting investors to seek safe-haven assets.
Spot gold rose 0.7% to $3,195.09 an ounce by 0700 GMT, after hitting a record high of $3,219.84 earlier in the session. The metal has gained around 5% this week. U.S. gold futures also climbed 1.1% to $3,213.40.
“The rapid weakening of the U.S. dollar is the main factor driving gold’s rebound. This seems to reflect an ongoing exodus from dollar-based assets, as stocks and bonds sell off amid tariff policy uncertainty,” said Ilya Spivak, head of global macro at Tastylive.
Dollar Decline and Market Reactions
The dollar was down 0.5% against its major peers, making gold, priced in U.S. dollars, cheaper for overseas buyers. U.S. stock indexes also fell after President Donald Trump raised tariffs on Chinese imports to 145%, although he implemented a 90-day pause on tariffs for dozens of other countries.
China’s Retaliation and Market Outlook
China has matched Trump’s tariff hikes, raising concerns that Beijing could push duties on U.S. goods even higher than the current 84%.
“The next key level for gold is $3,500. I don’t think we’ll get there immediately or without bumps along the way,” said Kyle Rodda, financial market analyst at Capital.com. Factors such as tariffs, central bank demand, expectations of Federal Reserve interest rate cuts, geopolitical instability, and increased investments in gold-backed exchange-traded funds (ETFs) have contributed to gold’s rally this year.
Inflation and Fed Rate Expectations
U.S. consumer prices unexpectedly fell in March, though inflation risks remain tilted to the upside. Traders now expect the Federal Reserve to resume rate cuts in June and potentially reduce rates by a full percentage point by the end of 2025.