Gold reaches new record highs

11 April 2025

Gold reaches new record highs amid accelerating safe-haven pivot

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

Gold reached new record highs for the second consecutive day, touching $3,220 per ounce in spot trading.

Gold’s gains come amid the accelerating escalation of the trade war and growing uncertainty about its future course following conflicting decisions on tariffs and doubts surrounding Donald Trump’s strategy, in addition to existing concerns about the consequences of this war on the American and global economy.

The trade war has reached the point where China responded by raising tariffs on imports from the United States to 125% from 84%, following Trump’s increase to 145%. This mutual escalation further weakens hopes for a diplomatic settlement to the conflict.

Donald Trump’s 90-day waiver on tariffs on countries worldwide failed to calm market fears for long, as the trade dispute with China accelerated. Meanwhile, investors have turned to buying gold on the decline. Over the two sessions, the largest physical gold exchange-traded fund, SPDR Gold Trust (GLD), recorded net positive inflows of more than $2.36 billion, a pace not seen since last February.

In addition, traders are moving to restore their positions in gold futures. According to data from the Chicago Mercantile Exchange (CME), open interest in gold futures increased by 7% yesterday compared to the bottom it reached last Tuesday. Traders’ reduced gold positions were a result of liquidation and use to cover positions in other assets, particularly stocks, after they experienced a massive collapse, as reported by the Financial Times last week.

Not only is the decline in investment appetite for riskier assets allowing gold to advance, but its sheen as a safe haven has created the conditions for its recovery and record new highs. The recent rise in Treasury yields has been primarily due to the erosion of their safe-haven status, along with concerns about inflation and the government’s budget, economist Mohammed El Erian told the BBC.

Furthermore, the inclusion of Treasury bonds in the middle of the trade war with China has exacerbated the market’s uncertainty, with speculation that China could sell its holdings (estimated at around $759 billion) to pressure the United States, according to the BBC. Thus, fear in the bond market reached its highest level since 2023 this week, as measured by the ICE BofAML U.S. Bond Market Option Volatility Estimate Index (MOVE).

The heightened levels of fear and uncertainty in the fixed income market make rising yields less effective in pressuring gold lower. This all comes at a time when it is unclear what Trump’s next steps in his trade war will be, even after he suspends tariffs on non-Chinese imports.

This uncertainty could negatively impact growth, investment, and expectations about future inflation, according to the Wall Street Journal. In addition, the repercussions of the tariff war will not be limited to the United States; they continue to threaten the Chinese economy. Its domestic market, already experiencing weak demand, may not be able to absorb the blow to exports—which it relies on to drive growth. This could force companies to bear the burden of tariffs to maintain their competitiveness, according to the New York Times. China may also face increasing difficulty marketing its exports, whether to other markets or to the United States via third parties to avoid tariffs.

Reuters reported that Vietnam is preparing to take strict measures to prevent the rerouting of Chinese exports to the United States. This comes at a time when non-US markets may seek to prevent Chinese exports from flooding their markets, which could pose a real threat to growth.

These concerns about the trajectory of both the US and Chinese economies and the ongoing uncertainty surrounding trade escalation keep risk appetite very low, prompting gold to continue its gains.

 

Zaid Barem /ymm