Safe-haven gold demand soars amid global trade woes

Khaleej Times

12-03-2025

Worries about a potential global trade war are driving demand for gold, keeping prices stable amid fluctuating market conditions with some bullish analysts even maintaining their target of $3,300 for the yellow metal.
As of 0928GMT on Wednesday, spot gold was steady at $2,919.06 an ounce, while US gold futures inched up slightly to $2,924.80. Investors are anxiously awaiting US inflation data that could sway the Federal Reserve's interest rate decisions, further complicating the economic landscape.
In the UAE, gold prices have also seen a rise, with 24-carat gold now priced at Dh351.25 per gram, an increase of Dh0.50, while 22-carat gold has climbed to Dh326.75.
Ole Hansen, head of commodity strategy at Saxo Bank, emphasises the ongoing demand for gold, attributing its stability to shallow correction attempts that have not significantly deterred managed money accounts that rely on momentum. 'The outlook for gold remains supportive, especially with recent dollar weakness and limited depth in corrections,' Hansen noted. 'While we recognise the risk of a deeper pullback, we maintain our bullish target of $3,300.'
Beyond diversification and safe-haven buying, central bank acquisitions and fiscal debt concerns are also likely to bolster gold's appeal, according to Hansen.
FXStreet analysts suggest that gold bulls may need to break through the $2,928-2,930 resistance level to unlock further gains, potentially pushing prices back toward the all-time high of $2,956 recorded on February 24. Conversely, if prices slip below $2,900, support may be found around the $2,880 mark, with further dips leading towards $2,800.
Investors are closely monitoring the upcoming US Consumer Price Index (CPI) report, which could have significant implications for interest rates going forward. Should rising price pressures necessitate sustained higher rates from the Fed, gold's allure as a non-yielding asset may diminish.
The market is already bracing for inflationary impacts from US tariffs, which have contributed to gold's recent record high.
Precious metals experts noted that in recent weeks, gold investment patterns have shown a divergence, with hedge funds and managed money accounts reducing bullish positions, while demand for bullion-backed ETFs remains robust. This contrast highlights differing investment strategies, as ETF investors often take a longer view, seeking refuge from potential stagflation in the US.
As the geopolitical landscape shifts and signs of slowing economic growth emerge, traders and investors are increasingly pricing in the risks of stagflation — a challenging combination of low growth, rising unemployment, and escalating inflation.
In these turbulent times, gold's enduring appeal as a safe haven is likely to persist, reflecting broader uncertainties in the global economy, experts added.