Gold Nears Record High as Trump Signals De-Escalation with China
Gold surged near a record high as U.S. President Donald Trump's conciliatory tone towards China weakened the dollar.
Gold traded above $2,780 an ounce, close to its October all-time peak. In an interview on Fox News, Trump indicated his preference for a non-aggressive approach to China. Consequently, the dollar index dropped by 0.7%, making gold more affordable for global buyers.
Gold's upward momentum this week (up nearly 3%) has been driven by safe-haven demand amidst global economic uncertainty. Joni Teves of UBS Group AG believes that even if tariffs are implemented, gold will benefit as investors seek diversification and a safe asset during volatility.
"We expect investors to prioritize gold's intrinsic value over dollar strength," Teves stated, emphasizing its appeal as a hedge against macroeconomic uncertainties.
Trump's trade-related comments have been closely monitored by traders since he took office. He has targeted China, the EU, Canada, and Mexico for potential tariffs, raising concerns about political repercussions. On Thursday, Trump expressed his intention to impose tariffs on Europe to revive U.S. manufacturing.
The president also advocated for immediate interest rate cuts. While reduced borrowing costs typically benefit precious metals, traders remain cautious as monetary policy decisions are solely made by the Federal Reserve.
Economic data showing a slowdown in U.S. business activity further supported gold prices. The sluggish growth in the services sector may encourage the Fed to continue with rate cuts, with its next decision scheduled for next week.
Inspired by the Fed's rate cuts, geopolitical tensions, and central bank purchases, gold set several records last year. Investors are now monitoring Trump's domestic agenda, particularly his tax cuts and immigration reforms. These policies could potentially weaken the economy and spark inflation, potentially complicating the Fed's rate-cutting path.
As of 10:18 a.m. ET, spot gold traded at $2,783.74 an ounce, approaching its record of $2,790.10. Silver, palladium, and platinum also experienced gains.