Gold prices surge to record high, with tariff war as ‘main driver’, analyst says

USA: Gold prices hit an all-time high on Tuesday (Feb 4) as the ongoing tariff war between the United States and China drove investors towards gold as a safe haven. Analysts pointed to China’s tariffs on the US as the “main driver” behind the surge, reported Reuters.

China responded to US tariffs on Tuesday with a series of “countermeasures,” including export controls on key minerals, a 15 per cent tariff on coal and liquefied natural gas, a 10 per cent tariff on US crude oil, farm machinery, large-displacement vehicles, and pickup trucks”. Beijing also launched an anti-trust investigation into Google.

Meanwhile, US President Donald Trump granted a one-month reprieve from the 25 per cent tariffs imposed on Mexico and Canada.

Spot gold rose 1.1% to US$2,844.56 (S$3,839.83) per ounce as of 1.40 pm ET (1840 GMT), after reaching a record US$2,845.14 (S$3,840.61) earlier in the session. US gold futures settled at US$2,875.80 (S$3,882)), up 0.7%.

Bob Haberkorn, senior market strategist at RJO Futures, said the tariffs were “the main driver” for the gold’s jump. He added, “The dollar was strong going into the week here, but with a lower dollar, that also definitely helps the price of gold.”

The US dollar fell 0.9 per cent, making gold cheaper for buyers using other currencies.

Three Federal Reserve officials warned on Monday that the Trump administration’s trade tariffs pose inflation risks, with one suggesting that price uncertainty calls for slower interest rate cuts.

US job openings dropped to 7.6 million in December, below the 8 million forecast, signalling a potential economic slowdown.

Bullion, seen as a hedge against inflation and geopolitical uncertainty, becomes less appealing when interest rates rise. However, with the current market instability and central banks possibly increasing gold purchases to reduce reliance on the US dollar, gold prices could reach US$3,000 (S$4,049.66) this year, according to Jim Wyckoff, a senior market analyst at Kitco Metals.

Investors are now looking ahead to the ADP employment report on Wednesday, the payrolls report on Friday, and speeches from Fed officials.

Meanwhile, spot silver climbed 2.5 per cent to US$32.33 (~S$43.64) per ounce, platinum rose 0.4 per cent to US$967.94 (~S$1306.61), and palladium retreated 1.3 per cent to US$994 (~S$1,341.79). /TISG

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