Gold prices reached new record highs on Thursday as escalating trade tensions drove investors toward safe-haven assets.
“The uncertainty over US President Donald Trump’s impending reciprocal tariffs on April 2 keeps investors on the edge,” Haresh Menghani, editor at FXstreet, said in a report.
This, along with the growing acceptance that the Federal Reserve (Fed) will resume its rate-cutting cycle soon and a modest US Dollar (USD) pullback from a three-week top, remains supportive of the bid tone surrounding the gold price.
At the time of writing, the most-active gold contract on COMEX was at $3,074.86 per ounce, up 0.8% from the previous close.
The contract had hit a record high of $3,075.90 per ounce earlier in the session.
The most-active silver contract on COMEX also rose 0.3% from the previous close to trade at $34.323 per ounce.
Safe-haven demand
The announcement of Trump’s tariffs, set to be implemented on April 2 alongside a series of other duties, triggered a risk-averse sentiment across global markets.
This led to substantial losses across both Wall Street and Asian stock markets.
Investors, fearing the potential negative impacts of the tariffs on global trade and economic growth, moved their capital away from riskier assets such as stocks and into safer havens like bonds and gold.
“The global risk sentiment took a hit in reaction to US President Donald Trump’s new auto tariffs announced on Wednesday,” Menghani said.
“Adding to this, the uncertainty over Trump’s impending reciprocal tariff next week weighs on investors’ sentiment and revives demand for the traditional safe-haven gold price on Thursday,” he added.
The new auto tariffs imposed by Trump will likely increase US car prices and could contribute to inflation.
The tariffs will also impact major economies such as Japan, Europe, and South Korea.
US Fed rate cut expectations
The US Federal Reserve adjusted its growth forecast downward and indicated two 25-basis-point interest rate cuts for 2025 due to uncertainty surrounding the effects of Trump’s trade policies.
Menghani noted:
This overshadows Wednesday’s upbeat US macro data and weighs on the US dollar.
Chicago Fed President Austan Goolsbee told the Financial Times that it may take longer than anticipated for the next cut because of economic uncertainty.
Goolsbee warned that if markets begin to anticipate higher inflation, policymakers should consider this a serious warning sign.
Minneapolis Fed President Neel Kashkari acknowledged the Fed’s progress in curbing inflation but emphasized the need for further action to reach the 2% target.
He also expressed uncertainty about the potential impact of Trump’s aggressive policies on the US economy.
St. Louis Fed President Alberto Musalem stated that there is no need for the US central bank to rush into cutting rates, as a restrictive policy is still required to bring inflation down to the 2% goal.
BofA raises gold price forecast
Gold price forecasts for this year and next have been raised by Bank of America (BofA), with near-term price support linked to ongoing uncertainty from US trade policies, according to a Kitco report.
BofA has raised its gold price forecasts, predicting that gold will trade at $3,063 per ounce in 2025 and $3,350 per ounce in 2026.
The bank’s previous forecasts were $2,750 per ounce for 2025 and $2,625 per ounce for 2026.
Spot gold prices could reach $3,500 within the next two years if investment demand increases by 10%, the bank reiterated in a note.
A key supporting factor could be central banks raising their gold reserves from the current 10% to over 30%.
However, BofA also added that the rally of bullion could be negatively impacted by US fiscal consolidation, reduced geopolitical tensions, a return to collaborative inter-governmental relations, and more targeted tariffs on April 2.
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