Gold prices rise amid tariff concerns

What’s happening:-

 Gold prices settled higher on Monday as markets continued monitoring trade tensions.

What happened:-

 US Federal Reserve officials signalled that they were ready to cut interest rates once growth risks become clear.Weakness in the US dollar lent further support to the yellow metal on Monday
Why it matters:-

 Gold prices have risen sharply this year after tariff announcements by US President Donald Trump. The yellow metal, which is considered a safe-haven asset during heightened geopolitical and financial concerns, surged to a record high above $3,500 an ounce last week.Although China has rolled back retaliatory tariffs on some US imports, Beijing denied assertions made by Trump of ongoing talks. US Treasury Secretary Scott Bessent also said that he was not aware of any trade talks between Trump and China’s President Xi Jinping.The US dollar moved lower across the board, lending support to gold prices, as investors awaited further news related to trade policy. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.7% to 99.01 on Monday.Gold futures jumped 1.5% to close at $3,347.7 an ounce on MondayIn other metals trading, silver settled at $33.005 per ounce and platinum settled higher at $995.2, while palladium closed at $950.30.

Gold prices rise again

What to watch:-

 Investors will continue monitoring announcements related to tariffs from the US and China.Investors await the release of major economic reports this week, which would help investors gauge the impact of tariffs on economic growth. Data on US job openings will be released on Tuesday, while the Personal Consumption Expenditures report is scheduled for release on Wednesday. The much-awaited NFP report from the US will be in focus on Friday

.What makes gold a safe haven from a trade war?

Gold has consistently outperformed other currencies during periods of economic instability. Gold's current massive rally shows a remarkable 71.6% increase over 17.9 months.This demonstrates exceptional resilience compared to other asset classes. This performance is not unusual. During the 2008 financial crisis, gold rose as a hedge by 5.5% while global stocks collapsed, a pattern that was repeated in 2020, with gold gaining 25%In 2024, gold gained 27.2% compared to the S&P 500's 23.3% gain, demonstrating its strength even during periods of relative market stability prior to the recent trade tensions.When the latest trade war tensions escalated in April 2025, gold lost only 0.9%, while the S&P 500 fell 10.5% in just two days.

• Gold's Unique Properties as a Safe Haven

Economist Adam Hamilton points out that "gold's historical superiority during crises stems from counterparty risk." Unlike government bonds or currencies, gold is not dependent on the promises or obligations of any party, making it immune to the default risks that plague other assets during economic turmoil.The limited supply of gold is another crucial advantage. While central banks can print unlimited amounts of paper money, the supply of gold grows by only about 1.5% annually through mining production. This scarcity becomes more valuable when trade wars threaten currency stability and inflation risks rise

How do trade wars affect gold prices?

The price of gold reached $3,123 on March 31, 2025, before Trump announced reciprocal tariffs on "Emancipation Day," which initially caused some volatility in the precious metals market. However, gold quickly established its status as a safe haven, rising 3.8% in a single day as the fallout from the trade war escalatedGold prices subsequently rose above $3,200 as investors increasingly sought a safe haven amid market turmoil. Despite the massive rally that lasted nearly 18 months, gold only saw a 4.6% decline at its worst. The rapid recovery from even minor setbacks highlights the strong underlying demand for gold during periods of economic uncertainty, especially when that uncertainty stems from trade disputes that threaten global growth and stability

.Who Drives Gold Demand During Trade Wars?

•  Central Bank Buying Patterns

Central banks have driven the massive rise in gold prices through sustained buying, with global institutions purchasing a record 1,136 metric tons in 2024. This unprecedented level of buying reflects growing concerns about the dollar's status as a reserve currency in an increasingly troubled global economy.China's central bank holds only about 5% of its $3,241 trillion foreign reserves in gold, far below the global average of 15%. As People's Bank of China Governor Yi Gang stated, "diversification from US dollar reserves is accelerating," suggesting there is plenty of room for China's gold accumulation to continue.Global central banks are also accelerating their diversification away from the US dollar as trade tensions escalate, with BRICS countries among the most active buyers. This represents a structural shift in reserve management that will support gold price drivers for years to come.Central banks view gold as a hedge against geopolitical risks, including trade wars, which explains their willingness to continue buying even as prices reach historic highs. Unlike private investors, who can be price-sensitive, central banks typically view their gold holdings over decades.