Gold Hits Record High as Investors Seek Safe Haven Amid Trade Tensions and Inflation Worries

Gold prices soared to a new all-time high of $2,902 per ounce on Monday, driven by a combination of factors including sustained central bank buying, global trade uncertainties, and increasing demand for safe-haven assets. The precious metal's strong performance, up 17.5% since the start of the year, contrasts with Bitcoin's recent struggles, highlighting gold's enduring appeal during times of economic and geopolitical turbulence.

Central Banks Continue to Embrace Gold: De-Dollarization and Geopolitical Risks

Central banks have been a major driving force behind gold's rally, continuing a trend of record accumulation that began in previous years. According to the World Gold Council, global gold reserves increased by 694 tons in the first ten months of 2024. The report anticipates that central banks will remain net buyers of gold in 2025, citing de-dollarization efforts and geopolitical risks as key motivations. Poland, India, Turkey, and China were among the largest purchasers of gold in 2024. The 2022 sanctions on Russia's central bank reserves are seen as a turning point, reinforcing gold's role as a geopolitical hedge.

The World Gold Council survey found that 69% of central banks expect to continue accumulating gold, with 83% of those in industrialized nations citing it as a hedge against inflation and financial instability.

Trade War Fears Reignite: Tariffs on Steel and Aluminum

The latest surge in gold prices coincides with renewed fears of a global trade war, sparked by the announcement of new U.S. tariffs on steel and aluminum imports. The tariffs, targeting major trading partners like Canada and Mexico, as well as China, have raised concerns about potential economic disruption and inflationary pressures. While U.S. steel and aluminum stocks surged in premarket trading, the broader market implications remain uncertain.

Bitcoin Struggles: Risk Asset or Digital Gold?

While Bitcoin is sometimes touted as "digital gold" and a potential hedge against uncertainty, its correlation with risk assets remains high, making it vulnerable to market sentiment shifts. In contrast, gold's traditional role as a safe haven asset appears to be strengthening its appeal during this period of heightened economic and geopolitical risk.