Gold prices surged to a record high on Tuesday. Investors flocked to the precious metal, seeking a safe haven after China retaliated against U.S. tariffs. This move sent shockwaves through the markets, pushing gold to new heights. Spot gold gained 0.7%, reaching $2,834.24 per ounce by 09:23 a.m. ET (1423 GMT), after briefly touching a record high of $2,836.98 earlier in the session.
The key factor driving the rise in gold prices was the escalating trade tensions between the U.S. and China. China imposed tariffs on U.S. imports, retaliating against new U.S. duties. This development has intensified the ongoing trade war between the world’s two largest economies. According to Bob Haberkorn, a senior market strategist at RJO Futures, “The tariff news came out like it did overnight; I think right now that’s the main driver than any other thing.” Haberkorn added that other economic data would likely be overshadowed by the tariff news in the short term.
Dollar Weakness Fuels Gold Rally
In addition to trade war fears, the weakening U.S. dollar played a role in driving gold prices higher. The dollar fell 0.5% on Tuesday, making gold less expensive for foreign investors. Haberkorn explained that a lower dollar strengthens the appeal of gold, which is priced in dollars. “With a lower dollar, that also definitely helps the price of gold,” he said.
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The tariff imposition by China comes at a time of high inflation risks. On Monday, three Federal Reserve officials raised concerns about the potential inflationary effects of the Trump administration’s trade policies. One official suggested that uncertainty about future prices might lead to slower interest rate cuts than previously anticipated. While bullion is typically seen as a hedge against inflation, higher interest rates tend to reduce its appeal as a non-yielding asset.
Investor Focus on Upcoming Economic Data
Despite the surge in gold prices, investors are keeping an eye on key economic data this week. U.S. job openings are due for release on Tuesday at 1500 GMT, followed by the ADP employment report on Wednesday. The highly anticipated payrolls report will be released on Friday. Additionally, speeches from several Federal Reserve officials are expected to provide further insight into the central bank’s approach to interest rates and inflation concerns. These economic indicators will likely impact market sentiment and influence gold prices moving forward.
While gold prices soared, other precious metals showed mixed results. Spot silver rose 1% to $31.87 per ounce. In contrast, platinum fell by 0.4%, settling at $968.05 per ounce. Palladium, another precious metal, saw a notable drop of 2.1%, closing at $987.75 per ounce. These fluctuations highlight the varying market dynamics for different metals, even as gold continues to dominate the precious metals market.
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