Spot Gold extended gains on Thursday, while holding within striking distance of record high of $3,167.57 per troy ounce, as market players rushed to the safe haven metal after the US increased tariffs on China – the latest escalation of the trade conflict between the two nations.
US President Trump announced on Wednesday that the tariff on Chinese imports would be raised to 125% from 104%.
Still, the Trump administration will also temporarily lower the levies recently imposed on several countries.
“If we enter a slow growth period, which is our base case, we think rates will eventually head lower and push gold higher since inflation worries will still be with us for much of the year due to tariff impacts,” Marex analyst Edward Meir was quoted as saying by Reuters.
“Eventually we do see $3,200 possibly by month-end, if not earlier.”
Spot Gold was last up 1.27% on the day to trade at $3,122.17 per troy ounce.
Strong central bank buying, US tariff plans, potential rate cuts by the Federal Reserve and escalating geopolitical tensions have fueled Gold’s rally to a series of record highs this year. Year-to-date, the yellow metal has surged 18.97%.
Market focus now sets on the key US CPI inflation report that may provide further clues over the Federal Reserve’s monetary easing path amid economic slowdown concerns.
In case price pressures continue to persist, and thus, prompt the Fed to maintain interest rates at higher levels, non-yielding Gold may lose some of its appeal.
The minutes of the FOMC meeting in March showed that policy makers expected inflation would be pushed higher this year because of the impact of elevated tariffs, though they acknowledged considerable uncertainty over the magnitude and persistence of these effects.
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