Gold surpasses $2,950

Gold surpasses $2,950 amid escalating trade conflict and the sudden geopolitical shift

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold reached more historic highs today, surpassing the $2,954 level in spot transactions.

Gold’s consecutive gains come after a new chapter of the trade war came out after Donald Trump announced expanded tariffs yesterday, which contribute to fueling uncertainty about the path of the US and global economy. Trump’s approach towards the war in Ukraine may also contribute to increasing geopolitical concerns, contrary to the optimism that may appear with the efforts to end the conflict.

Donald Trump stated that is considering imposing 25% tariffs on imports of cars, semiconductors, and pharmaceutical products. These are in addition to the tariffs previously imposed on aluminum and steel, and those on Chinese goods.

While uncertainty about the future of other countries’ economies due to this war and the retaliatory steps they may take against American interests and companies are among the most important positive factors for gold demand. This safe-haven demand gives it the ability to face the upward risks of inflation from this trade war and the tightening outlook for monetary policy that will follow.

Federal Reserve policymakers have repeatedly stressed their concerns about the role of the trade war in rising prices, which makes them more cautious about making decisions to cut interest rates. This was confirmed again in the minutes of the last meeting of the Federal Reserve Open Market Committee, which was published yesterday, but gold has moved up eventually.

Another aspect that may contribute to fueling geopolitical uncertainty is the position of the new US administration towards the war between Russia and Ukraine. Despite the accelerated and unprecedented efforts to negotiate peace since the outbreak of the war three years ago. Trump is taking a more conciliatory approach towards Russia, in conjunction with the confrontational tone towards the Ukrainian president Volodymyr Zelensky, as we witnessed through the verbal exchange between the two presidents.

This has raised experts’ concerns about the consequences for the existing global order after the structural shift of the US position. Former US Secretary of Defense Chuck Hagel said that what is happening is a serious challenge to the foundations of the world order that was formed after World War II, according to Wall Street Journal.

The Journal’s Editorial Board also believes that a peace deal that amounts to Ukrainian surrender will be a blow to American power and would extend to the Pacific and the Middle East. The Washington Post quoted former US intelligence official Andrea Kendall-Taylor as saying that Trump wants to reach an agreement just to be able to say that he has ended the war without caring about the consequences of Russia attacking again, as long as it does not happen on his watch.

Therefore, the current peace process in Ukraine may be seen as fake and temporary and does not lead to an inevitable end to the conflict – but may encourage it to escalate.

In addition, cutting off international aid provided by the United States would open the way for other great powers, most notably China, to fill the void, which could also pose a threat to US influence, which in turn could increase the possibility of a clash between the poles of the world in its new order.

Zaid Barem/ ymm