Gold price sets new high as US-China trade war escalates

Gold soared to a new high on Thursday after posting its biggest one-day gain in 18 months, as an escalation of the US-China trade war overshadowed US President Donald Trump’s tariff relief.

Spot gold rallied 2% to $3,147.15 per ounce by 10:25 a.m. ET, approaching the all-time high of $3,167.75 set last month. US gold futures in New York shot up by 2.6% to $3,160.50 an ounce.

The rally followed an initial surge in the previous session that saw the precious metal gain over 3%, as US tariffs on 60 of its trade partners came into effect. Trump’s subsequent announcement of a 90-day pause to higher tariffs on some countries did not slow down gold, despite reinvigorating the US stock market to record its best intraday performance since the financial crisis.

Still, Trump also hiked duties on China to 125%, effective immediately, after Beijing announced plans to retaliate with an 84% tariff — exacerbating concerns the world’s two biggest economies will become enmeshed in a crippling trade war.

“When you’re in a crisis and gold is selling off, that’s telling you you’ve got a liquidity problem,” Carlyle Group Inc.’s Jeff Currie told Bloomberg Television on Thursday.

“Then boom, they came out with the reprieve, gold bounced back up which is telling you liquidity came back into the system,” he said. 

Supporting gold’s rally is a further weakening of the greenback, with the US dollar index down over 1.3% on Thursday.

“Gold regains its safe-haven appeal and gets back on track for new all-time highs,” said Nikos Tzabouras, senior market analyst at Tradu.com, in a Reuters note.

“However, prospects of deals with trading partners pose a significant risk to gold’s upside potential, as they could renew pressure on the metal. Additionally, headwinds may arise from pared-back Fed rate cut bets that can strengthen the dollar.”

Data on Thursday showed US consumer prices unexpectedly fell in March, but inflation risks are tilted to the upside after Trump doubled down on China tariffs.

Following the data, traders are anticipating that the US Federal Reserve will resume cutting interest rates in June and probably reduce its policy rate by a full percentage point by the end of the year.

“We see central banks buying (gold), so as long as we see inflows into ETFs and more of the monetary policy risks, there’s a lot of key drivers that will continue to support gold,” Alex Ebkarian, chief operating officer at Allegiance Gold, predicted.

(With files from Bloomberg and Reuters)