Gold sets new high as trade war fears

17 Nisan 2025

Gold Sets New High as Trade War Fears and Rate Cut Expectations Provide Support

Written by Linh Tran, Market Analyst at XS.com

Gold posted its strongest daily gain since the beginning of the month, surging by 3.8% in a single session and setting a new all-time high near $3,358/oz, as a wave of defensive sentiment spread across global financial markets. Risk appetite quickly deteriorated after the U.S. unexpectedly announced plans to tighten trade policy, while easing inflation signals continued to reinforce expectations that the Federal Reserve would soon begin a monetary easing cycle.

The highlight of the session was the Trump administration’s decision to end the “de minimis” rule, a trade policy that allows duty-free imports for shipments valued under $800. In recent years, this loophole has been widely exploited by Chinese companies—particularly in consumer goods, electronics, and low-cost fashion—to avoid tariffs.

Closing the de minimis window not only drives up the cost of imported goods from China but also sends a strong political signal that Washington is serious about reviving a wave of protectionism. This has immediately raised investor concerns over the possibility of an escalating trade war, supply chain disruptions, and rising global goods prices—developments that could weigh heavily on economic growth. In this context, gold quickly attracted defensive capital flows, reaffirming its role as a hedge against systemic risks.

Beyond trade tensions, the primary catalyst remains interest rate expectations. March CPI and PPI data from the U.S. showed positive inflation trends, with both indicators coming in softer than expected. This has significantly increased the probability that the Fed could begin cutting interest rates as early as September, or even sooner if upcoming data continues to weaken.

Notably, in his latest remarks, Fed Chair Jerome Powell acknowledged a stronger-than-expected rise in March retail sales, but still emphasized that the U.S. economy is showing signs of slowing. He reaffirmed the Fed’s readiness to act should market conditions worsen. These somewhat dovish comments have further strengthened market conviction that a policy pivot may be on the horizon—a historically favorable backdrop for gold.

Finally, the global geopolitical landscape continues to support gold’s safe-haven appeal. The war between Russia and Ukraine shows no signs of de-escalation, while tensions in the Middle East are intensifying, with increasing risks of regional spillover. In an environment of rising geopolitical uncertainty, capital flows are increasingly shifting away from risk assets and into safe-haven channels such as gold.

With the combined influence of trade risks, interest rate expectations, and geopolitical instability, gold is currently benefiting from both short-term inflows and long-term structural demand. Unless a major unexpected shift occurs, gold prices have a strong foundation to climb toward new highs in the coming period—especially if the Fed begins a rate-cutting cycle as the market anticipates.

 

Zaid Barem / ymm