Gold prices hit an all-time high of USD $3,004.86 per ounce on March 14, and many traders believe that the momentum can take the yellow metal higher due to uncertainty over the impact of U.S. President Donald Trump’s tariff policies.
Gold prices have risen by almost 14 percent in dollar terms so far this year, driven largely by “safe haven” buying due to worries over the impact of the tariffs, which have driven a selloff in stock markets.
Central banks, notably China’s, have been ramping up gold reserves, in an attempt to diversify away from the U.S. dollar.
Geopolitical turmoil, notably fears over escalating trade wars, is compounded by worries over the outlook for the wars in Ukraine and the Middle East.
Gold, which bears no yield, can also get a lift from expectations of further cuts in U.S. interest rates, perhaps in June.
A climate of falling interest rates can boost the appeal of bullion to investors.
Fears of a so-called “Trumpcession”, a recession ignited by President Trump’s aggressive trade policies, may lead the Federal Reserve (Fed) to cut rates despite fears of stubborn inflation linked to tariffs.
The latest Kitco News Weekly Gold Survey showed bullish sentiment in the gold market persisting despite the unprecedented price levels, with a solid majority of market participants predicting higher gold prices during the coming week.
“Up,” Kitco News quoted Adrian Day, president of Adrian Day Asset Management, as saying.
“Strong central bank buying continues, and gold will move above $3,000. That round number is not a barrier for foreign central banks, or indeed foreign buyers who price gold in their own currencies.”
Looking further ahead, several traders and analysts see potential upside in gold, with some noting that bullion could reach around USD $3,300 per ounce later this year.
The British pound has strengthened in the face of a weakening dollar, but fears over a “Trumpcession” may lead the Bank of England to hold off on a rate cut and hold rates steady at its next meeting on March 20.
Several economists see only two more 25-basis points UK rate reductions this year, fewer cuts than previously foreseen, as inflation may linger longer due to the impact of tariffs.
Tariffs make goods more expensive for consumers, and can reduce demand, possibly leading to layoffs and economic slowdown.
Despite official date on March 14 showing that the UK economy unexpectedly contracted by 0.1 percent in January, many economists expect the Bank of England to hold rates steady this month.
