Gold prices hit a new record high on Thursday as restrictions on chip sales to China and persistent U.S. tariff uncertainty raised demand for the safe-haven asset.
In Dubai, gold rates marked notable gains, with 24-carat gold rising AED8.25 in the past 24 hours to AED402.75 and 22-carat gold rising to AED372.75. Additionally, 21-carat gold gained AED7.5 during the same period to AED357.5, while 18-carat gold edged up AED6.25 to AED306.5.
Globally, spot gold gained 0.33 percent to $3,340.28, as of 4:06 GMT, after touching a record high of $3,357.4 earlier in the session. Bullion has gained more than 3 percent so far this week.
U.S. gold futures rose 0.24 percent to $3,354.34.
U.S. dollar weakness drives gold’s strong performance
Marking another escalation in the ongoing trade war, U.S. President Donald Trump ordered a probe into potential new tariffs on all critical minerals imports on Tuesday, in addition to revisions of pharmaceutical and chip imports. Meanwhile, China ordered airlines not to take additional deliveries of Boeing aircraft.
“It is clear that gold’s strong performance has to a great extent been driven by USD weakness, most notably against the three current go-to currencies of EUR, JPY, and CHF, leading to more modest gains for investors in those regions and countries, while investors in China and India, two of the world’s biggest markets for retail demand, have seen currency moves that justify an increased exposure to gold as a hedge against local currency weakness,” stated Ole Hansen, head of commodity strategy, Saxo Bank.
The dollar index hovered near a three-year low hit last week, making gold more attractive for other currency holders. Gold, traditionally seen as a hedge against political and economic uncertainty and inflation, has risen more than 27 percent so far this year.
“In the short to medium term, a combination of heightened global economic tensions, the risk of stagflation—a combination of lower employment, growth, and rising inflation—a weaker dollar, may, in our opinion, continue to support bullion, and to a certain extent also silver,” added Hansen.
Market prices June rate cut
Federal Reserve Chair Powell muted rate cut expectations by stressing that the central bank must ensure tariffs don’t trigger a more persistent rise in inflation. Powell added that a weakening economy and high inflation could conflict with the central bank’s two goals, making a stagflationary scenario possible.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said at the Economic Club of Chicago.
U.S. retail sales exceeded projections compared to the previous reading. Meanwhile, U.S. industrial production data hinted that manufacturing activity continued to slow down. Retail sales rose 1.4 percent in March, beating the 1.3 percent forecast and surging from February’s 0.2 percent, boosted by strong auto sales. The Federal Reserve also announced that industrial production fell 0.3 percent in March, following a 0.8 percent increase in February.
The Fed’s next meeting is in 20 days, with traders largely expecting the central bank to keep interest rates steady. However, 56.3 percent of investors expect the Fed to make a 25-basis-point rate cut in June and 47.1 percent expect the central bank to cut rates again in July, according to the CME FedWatch tool.
“Currently, the futures market is pricing in the possibility of a 75–100 basis point rate cut before year-end, suggesting a more accommodative monetary policy. Lower interest rates reduce the opportunity cost of holding gold (which doesn’t pay interest), thereby supporting its price,” added Hansen.
Read| Apple regains top position: Shares rise amid tariff relief, market value surpasses $3 trillion
Other precious metals
As gold prices continued to set new highs, the precious metals market was in the red on Thursday. Spot silver fell 0.76 percent to $32.50 while platinum dipped 0.29 percent to $964.37 and palladium declined a notable 1.45 percent to $957.75.
