Gold under the shadow of trade war

In the current global economic landscape, the trade war is like a dark cloud, bringing huge uncertainty to the market. With the escalating tariff policy of US President Trump, investors are increasingly concerned about the economic outlook and have flocked to gold, a traditional safe-haven asset, causing gold prices to continue to rise and approach historical highs.

The Trump administration's imposition of tariffs on many countries, especially on major trading partners such as the European Union and China, has triggered a strong reaction in the global market. The escalation of the trade war not only threatens the stability of the global supply chain, but may also lead to economic recession and rising inflation. Against this background, investors are risk-averse, and the attractiveness of gold as a safe asset has become increasingly prominent. Recently, the spot gold price has broken through the $3,000 per ounce mark and has repeatedly set historical records, reaching a high of $3,017, showing the market's deep concern about the consequences of the trade war.

In addition to the trade war, geopolitical tensions are also an important factor driving gold prices. The ongoing conflicts in the Middle East and the unresolved Russia-Ukraine issue have caused investors to lose confidence in risky assets and turn to gold for safe havens. At the same time, the direction of the Federal Reserve's monetary policy has also provided support for gold prices. The market generally expects the Federal Reserve to maintain an accommodative monetary policy to cope with the downward pressure on the economy. The low interest rate environment reduces the opportunity cost of holding gold, further stimulating the increase in gold demand.

From historical experience, gold tends to perform well during periods of trade wars and geopolitical tensions. Looking back at the gold bull market from 2011 to 2020, the price of gold soared from more than $1,000 to more than $1,900. The driving force behind it was global economic uncertainty and the loose policies of central banks. At present, the destruction of the global trade system and the loose cycle of monetary policy have once again provided strong support for the rise in gold prices.

Analysts generally believe that as long as trade wars and geopolitical risks persist, the safe haven demand for gold will not weaken. Goldman Sachs has raised its year-end target price for gold to $3,100, and pointed out that the continued purchase of central banks will be one of the key drivers of rising gold prices. In addition, weak global macroeconomic data and rising inflationary pressures have also made investors worried about the prospects of the bond market, further boosting the attractiveness of gold.

However, the continued rise in gold prices also brings certain risks. At high prices, the market may see profit-taking, leading to more volatile gold prices. In addition, if the trade war can be eased or the global economy shows clear signs of recovery, the safe-haven demand for gold may weaken, thus affecting the trend of gold prices.

For investors, gold remains an important asset allocation tool in the current market environment. It not only provides a safe-haven function, but also preserves and increases value during periods of inflation. However, investors also need to pay attention to the risks of gold price fluctuations and reasonably control their positions to achieve long-term investment returns.

In summary, concerns about the trade war have exacerbated market uncertainty and driven the continued rise in gold prices, bringing it close to its historical high. In the future, the performance of gold will depend on the evolution of the global economic and political situation and changes in investors' demand for safe-haven assets. Investors should pay close attention to relevant developments to formulate reasonable investment strategies.