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Gold has enjoyed its best week in five years, surging to record highs as investors rushed to the safety of one of the few havens left in global markets in the wake of Donald Trump’s tariff blitz.
Bullion climbed more than 6.5 per cent by Friday close, reaching a new high of $3,237 per troy ounce — the biggest weekly gain since the early stages of the Covid-19 pandemic in March 2020.
The rise came as the market panic unleashed by the US President’s trade war caused investors to pull back from US Treasuries, a haven in normal times, as equities nosedived and the dollar fell to three-year lows against the euro.
“A broad sell-off in US equities and Treasuries has shaken confidence in American assets, prompting investors to seek safety in gold,” said Alexandre Zumpfe, a bullion trader at Heraeus.
“The rally is being fuelled by growing fears of a full-blown trade war,” he added, pointing to mounting recession risks, soaring bond yields and a weakening US dollar as contributing factors.
As gold is priced in dollars, it typically benefits from a weaker US currency, as this makes it cheaper to buy in other currencies.
The escalating global trade war has roiled markets and contributed to uncertainty about the health of the US financial system. On Friday, Beijing hit back at Washington with a 125 per cent tariff on US imports.
“You hold gold when you are worried about the system breaking,” said Peter Mallin-Jones, analyst at Peel Hunt. “It is not surprising that the safe haven of Treasuries, or just holding the dollar in cash, is not as appealing as it has been in previous crises.”
Bullion has been on a historic rally this year, propelled by strong demand from investors as well as physical buying from central banks seeking to diversify away from the dollar.
During the first quarter, inflows into gold-backed exchange traded funds were at their highest levels since the coronavirus pandemic.
Will Rhind, chief executive of GraniteShares, an ETF company, said the flight into gold in recent days had been motivated by fear.
“We are in this highly unusual situation, where the flight to traditional safe havens hasn’t been working,” he said, pointing to the rising Treasury yields. “You see rates rising in an environment where people are nervous about the market — that breaks the trust loop.”
Physical demand for gold has also been strong this week, and in China buyers are paying a significant premium for the metal over international spot prices, a sign of strong demand.
UBS raised its gold price forecast on Friday for the second time this year, to $3,500 per troy ounce over the next 12 months, up from the $3,000 forecast made at the start of the year.
“We expect additional demand from central banks, institutions and investors following current events,” UBS analysts wrote in a note to clients.
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