Gold's Upside Potential Amidst Trade War Fears
Summary:
Gold prices experienced a modest dip on Tuesday after a 10% surge this year. However, analysts anticipate further gains for the precious metal due to recent tariff announcements and the threat of an escalating trade war.
Market Recap:
Gold futures (GC=F) retreated after reaching a record high of over $2,960 in response to President Donald Trump's proposed tariffs on steel and aluminum imports. Despite the pullback, analysts remain optimistic about gold's prospects.
Analyst Perspective:
* Solita Marcelli, UBS Global Wealth Management's chief investment officer for the Americas, views gold as an effective portfolio hedge and diversifier.
* Marcelli forecasts gold prices to reach $3,000 per ounce by 2025 due to continued support amid risk aversion and strong demand.
* UBS analysts highlight the potential for further rate reductions from the Federal Reserve to boost gold's investment case.
Tariff Uncertainty:
* The executive order raising tariffs on steel and aluminum imports has sparked concerns of a trade war.
* The European Union plans to retaliate, escalating tensions and driving demand for gold as a safe haven.
* Goldman Sachs analysts caution that if tariff threats subside, gold prices may experience setbacks.
Central Bank Support and ETF Inflows:
* Central banks' increased gold purchases in the fourth quarter of 2024 contributed to its meteoric rise.
* China's recent approval of insurance firms to invest in gold further bolsters demand.
Conclusion:
Despite short-term volatility, the threat of a trade war, combined with central bank support and ETF inflows, suggests continued upside potential for gold prices.