US-China trade war intensifies, pushing gold prices to all-time highs

Meanwhile, global gold demand rose 1% to a record 4,974.5 metric tons in 2024, driven by higher investment and increased central bank purchases in the 4th quarter, according to the World Gold Council

Gold prices jumped 1 per cent on Wednesday, continuing their record rally, driven by safe-haven demand amid the escalating US-China trade war, while the spotlight was also on payrolls data from the world's largest economy.

Spot gold rose 0.9 per cent to $2,867.59 per ounce by 0906 GMT, after rising 1 per cent and hitting a record high of $2,869.68 earlier in the session. US gold futures gained 0.7 per cent to $2,895.

China imposed tariffs on US imports in a prompt retaliation to newly introduced US duties on Chinese goods, reigniting the trade war between the world's two largest economies, while US President Donald Trump stated he is in no rush to speak with President Xi Jinping to de-escalate tensions.

 

"The potential economic consequences of a trade war between the US and China are causing investors to fear a global recession and rising inflation," said Dominik Sperzel, head of trading at Heraeus Metals Germany.

Meanwhile, three Federal Reserve officials warned that Trump's trade tariffs could drive inflation, with one suggesting that uncertainty over price outlooks warrants slower interest rate cuts. Investors this week are watching out for the ADP employment report and the payrolls report, which could shed further clues on the US rate path.

Bullion is considered an inflation hedge, but higher interest rates could dampen its appeal as the metal yields no interest.

"Gold is overbought and needs to correct," said StoneX analyst Rhona O'Connell, adding "there is still scope for further upside, but barring any black swans we still expect to see the price topping out this year."

Gold's relative strength index is at 76, indicating that the price has surpassed the "overbought" territory that starts at 70. [TECH/C]

Meanwhile, global gold demand rose 1 per cent to a record 4,974.5 metric tons in 2024, driven by higher investment and increased central bank purchases in the fourth quarter, according to the World Gold Council.

Spot silver rose 1.1 per cent to $32.44 per ounce, platinum gained 1.3 per cent to $976.05 and palladium added 0.8 per cent to $998.00.