Gold Extends Rally as Tariff Threats Fuel Buying
Gold surged above $2,900 on Monday, setting a new record as escalating tariff threats spurred buying and analysts remained bullish on the safe-haven asset.
Gold futures (GC=F) climbed over 1.6% to approximately $2,935, extending the previous week's all-time highs.
President Trump's announcement over the weekend to impose 25% tariffs on steel and aluminum imports into the United States, on top of existing duties, has heightened market uncertainty. The President also indicated plans to unveil retaliatory tariffs against countries levying duties on US goods.
Analysts at Wall Street firms have maintained their optimism towards gold amidst rising tariff threats. In a recent note, Solita Marcelli, Chief Investment Officer for the Americas at UBS Global Wealth Management, recommended a 5% allocation of gold within a USD balanced portfolio for hedging and diversification.
Goldman Sachs analysts have also reiterated their bullish stance, citing the potential for elevated US policy uncertainty to drive demand from central banks and investors.
JPMorgan analysts, however, cautioned of a potential downside in gold prices in the near term if stocks sell off. They nevertheless believe that the threat of tariffs will continue to support prices in the medium term.
According to the World Gold Council, gold demand reached record levels in 2024, with central banks actively purchasing the precious metal to hedge against inflation, geopolitical tensions, and diversify their portfolios.
The Federal Reserve's rate-cutting cycle has also contributed to inflows into physical-backed gold ETFs.
Year-to-date, gold has gained nearly 10%, building on its substantial 27% rise in 2024.