Tariff Threats Propel Gold Prices To All-Time High

Gold prices soared to an all-time high on Wednesday after safe haven flows jumped amid U.S. President Donald Trump’s growing tariff threats. Spot gold was quoted at $2,935.10 an ounce at 9.30 am ET after surging to an all-time-high of $2,946.85/oz earlier in the session. Gold prices have now hit a new high nine times so far in 2025.

“Gold’s rally appears to be driven by President Trump’s remarks on upcoming tariffs for autos and pharmaceuticals, which could pave the way for a push toward $3,000,” Zain Vawda, market analyst at MarketPulse, told Reuters.

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Gold continues to benefit from the broad uncertainty created by tariffs and the potentially inflationary pressures or implications of demand destruction. The Trump administration has announced 25% tariffs on aluminium and steel, a move likely to indirectly impact the auto industry and could depress sales. Gold not only plays an important role in portfolio diversification but can also be an effective hedge against uncertainties. Gold prices have surged since late 2022, with the commodity in high demand as a geopolitical hedge due to Russia’s war in Ukraine and also demand for an inflation hedge. Falling interest rates have also made the yellow metal attractive while a stronger dollar has added fire to the rally thanks to gold generally being dollar-denominated.

However, the physical gold market has shown signs of weakening as India’s market continues to trade at a discount. The latest trade data shows that gold shipments to India tumbled to 31 tons, good for a 46% month-over-month decline and the lowest since March 2024. Meanwhile, China’s market continues to toy with a discount. Preliminary data suggests net purchases have slowed, with Türkiye adding 5.4 tons in January and 0.6 tons in February so far.

Experts have, however, predicted that the gold price rally is likely to continue. Market focus will shift to the Federal Reserve’s interest rate stance, with minutes of its January policy meeting due later on Tuesday, “Any bearish impact (on gold) from today’s FOMC minutes release is expected to be short-lived,” Vawda said.

By Alex Kimani for Oilprice.com

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