Gold prices rally as Trump ratchets up geopolitical tensions
By Abigail Townsend
Date: Wednesday 05 Feb 2025
(Sharecast News) - Gold prices surged on Wednesday, hitting fresh highs, as geopolitical worries and trade tensions between the US and China intensified.
The safe haven asset has been on the rise since US president Donald Trump started imposing tariffs on a number of countries last month.
Gold prices have already put on more than 8% so far this year, and on Tuesday spot gold added another 1% early in the session to reach a new record of $2,869.68 per ounce.
Trump announced over the weekend a 10% levy on Chinese imports, to come into effect on Monday. Beijing, which initially urged Washington to enter negotiations, retaliated with a 15% tariff on coal and liquefied natural gas products, as well as 10% on crude oil, agricultural machinery and large-engine cars imported from the US.
They are not due to come into effect until 10 February, but that did not stop investors shifting into gold.
Further fuelling the flight to safety was Trump's overnight comments about Gaza, which stunned markets and reignited fears of further conflict in the Middle East.
Speaking at a White House press conference alongside Israel prime minister Benjamin Netanyahu, Trump said the US should "take over" the devastated Gaza strip and its Palestinian population should be resettled. Hamas and Saudi Arabia condemned the proposal.
Neil Wilson, analyst at TipRanks, said there was likely "some fresh geopolitical premium being priced into the metal" in the wake of Trumps comments.
Ipek Ozkardeskaya, analyst at Swissquote, said: "Havens continue to see increased demand on the back of growing global uncertainties under Trump's hectic lead, and with the prospects that the first weeks under Trump is just a foretaste of what's to com in the next four years.
"There's not better hedge than gold for protecting a portfolio from Trump worries: the more chaotic international relations become, the greater the demand, especially from central banks looking reduce US exposure should Trump turn his focus on them."
Tony Redondo, founder of Cosmos Currency Exchange, said investors were seeking safety amid "market uncertainty, geopolitical risks and Trump's policies".
"Future Fed cuts, increasing trade tensions and political instability could push gold past $3,000. While a pullback is always a possibility, as a stronger US dollar may limit gains while profit taking could trigger corrects, the current volatility would suggest otherwise."
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