Trump's trade war pushes gold higher
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KARACHI:
US President Donald Trump's rhetoric and escalating trade tensions between the United States and China have fuelled panic among investors, driving them to seek refuge in gold. As a result, gold prices reached an all-time high on Wednesday.
In Pakistan, the price of gold surged significantly, with per tola rates increasing by Rs5,300 to hit a record Rs299,600, according to data from the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA).
The significant increase in gold prices is primarily attributed to fears of a potential new trade war. This escalation began when Beijing imposed tariffs on US imports in retaliation to new American duties on Chinese goods. Additionally, Trump's statement about the US 'taking over' the Gaza Strip has contributed to these concerns.
"US President Donald Trump's remarks regarding Gaza, in which he suggested that Israel should take control and displace the local population, played a significant role in driving gold prices higher," Abdullah Abdul Razzaq, a member of the APGJSA, told The Express Tribune. Razzaq said that historically, gold has been a preferred safe-haven asset during times of political and economic instability. Investors tend to shift their capital into gold when there is fear of escalating conflict, as it is perceived as a stable store of value.
Razzaq said that if geopolitical tensions continue to escalate, particularly in the Middle East, it is likely that gold prices will maintain their upward momentum. Conversely, any diplomatic resolutions or easing of tensions could lead to stabilisation or correction in the gold market.
"The gold market has been extremely active, with prices fluctuating sharply," said Adnan Agar, Director at Interactive Commodities. He pointed out that recent geopolitical tensions, particularly US sanctions on Iran and the ongoing situation in Gaza, have fuelled demand for gold as a safe-haven asset. He also noted that comments from former US President Donald Trump have historically influenced market volatility.
Looking ahead, Agar emphasised the importance of upcoming economic data, particularly the US non-farm payroll report, which could determine the next direction for gold prices. While he expects a potential price correction of $50$60, he cautioned that if gold continues its strong rally without a break, the chances of a sharp decline will increase. He also highlighted that, unlike stocks, gold does not offer dividends, making profit-taking a common occurrence after major price surges.
Market expectations suggest that if momentum persists, gold prices could approach $2,900 in the near term. Longer-term projections indicate that gold may continue its upward trajectory. Earlier, analyst predicted the yellow metal could reach $3,000 or even $3,300 per ounce by 2025. However, Agar suggested that after months of continuous gains, the gold market may soon take a breather before resuming its upward trend.
Internationally, global gold demand, including over-the-counter (OTC) trading, rose by 1% to a record high of 4,974.5 metric tonnes in 2024 as investment increased, the World Gold Council (WGC) said on Wednesday, adding that central banks sped up buying in the fourth quarter.
Spot gold prices rose by 27% last year, the most since 2010, as investors chose the metal to hedge against global risks and as the US Federal Reserve slashed interest rates. Prices hit another all-time high on Tuesday, driven by safe-haven demand after China retaliated with tariffs on the United States in response to President Donald Trump's trade levies.
Gold prices regained an all-time high on Tuesday, driven by investors seeking the safe-haven asset after China retaliated with tariffs on the US in response to President Donald Trump's tariffs. Spot gold gained 1.1% to $2,844.56 per ounce, after hitting a record high of $2,845.
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