Gold prices attained their highest point ever on Wednesday following fears that the United States and China might initiate a trade conflict. The prices increased after China started imposing tariffs on American imports following new U.S. duties on Chinese products. The spike reflects investors turning to gold as a safe-haven asset amidst escalating tensions following President Donald Trump’s tariffs.
In the UAE, gold rates increased, with 24-carat gold climbing AED2.75 to AED344, while 22-carat gold experienced a hike of AED4.25 to AED320.25. Additionally, 21-carat gold rose by AED1 to AED307, and 18-carat gold saw an increase of AED0.75 to AED263.
Spot gold was up 0.2 percent at $2,848.69 per ounce as of 0253 GMT, after achieving a record high of $2,853.97 earlier in the trading session. U.S. gold futures also gained 0.2 percent, reaching $2,879.70. U.S. President Donald Trump remarked on Tuesday that he is in no hurry to engage with Chinese President Xi Jinping to alleviate the trade tensions between the two largest economies globally.
China’s response to U.S. tariffs
China imposed targeted tariffs on U.S. imports on Tuesday and warned several companies, including Google, of possible sanctions as a measured response to Trump’s tariffs.
The Trump administration’s trade tariff plans come with inflation risks, as cautioned by three Federal Reserve officials on Monday. One official argued that the uncertainty surrounding price outlook necessitates a more cautious approach to interest rate cuts. Although gold is viewed as a hedge against inflation, rising interest rates could diminish its allure among investors.
Read more: UAE gold prices rise AED2.5, global rates hit record high on Trump tariff concerns
Economic data on investors’ radar
Key economic data on investors’ radar this week includes the ADP employment report set for release at 13:15 GMT and the payrolls report on Friday, which may provide further insight into the health of the U.S. economy. Spot silver increased by 0.2 percent to $32.15 per ounce, platinum edged up 0.3 percent to $966.95, while palladium fell 0.9 percent to $981.75.
Gold prices dipped on Tuesday but remained close to the record high achieved in the previous session, as concerns about U.S. tariffs on China and inflation heightened safe-haven demand. In the UAE, gold rates rose, with 24-carat gold gaining AED2.5 to AED341.25 and 22-carat gold increasing AED2.25 to AED316. Meanwhile, 21-carat gold rose by AED2.25 to AED306, and 18-carat gold increased by AED2 to AED262.25.
Globally, spot gold fell 0.15 percent to $2,814.6 per ounce as of 5:11 GMT, having reached a record high of $2,830.49 on Monday. U.S. gold futures declined by 0.35 percent to $2,846.99. The U.S. dollar index decreased by 0.13 percent to 108.85, enhancing bullion’s appeal for holders of other currencies.
Trade war fears affecting gold prices
President Donald Trump announced a suspension of tariffs on Mexico and Canada on Monday, agreeing to a 30-day pause in exchange for concessions on border and crime enforcement with these nations. However, tariffs on China took effect at 05:01 GMT on Tuesday, as per Trump’s written order. The market interprets Trump’s tariff policies as inflationary.
The 25 percent tariffs imposed by Trump on Canadian and Mexican imports starting Tuesday, coupled with a 10 percent levy on Chinese goods, have heightened fears of a trade war that could impede global growth and elevate inflation. Canada and Mexico have initiated retaliatory measures, while China stated it would contest the tariffs at the World Trade Organization and implement unspecified countermeasures.
Gold prices are likely to maintain support from market volatility driven by policy uncertainty. Bullion is regarded as a safeguard against inflation as well as geopolitical instability.
U.S. job openings fall as labor market cools
U.S. job openings saw a notable decline, dropping by the most in 14 months in December. However, steady hiring alongside low layoffs indicated that the labor market is not experiencing an abrupt slowdown, suggesting that the Federal Reserve may delay cutting interest rates until at least June.
The Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS report, released on Tuesday, indicated there were 1.1 job openings for every unemployed individual, down from 1.15 in November. Fed Chair Jerome Powell expressed last week, “We do not need to be in a hurry to adjust our policy stance.” Job openings—a key measure of labor demand—decreased by 556,000 to 7.6 million by the end of December, marking the largest decline since October 2023.
Data for November was revised upward to reflect 8.156 million vacancies instead of the initially reported 8.098 million. Economists surveyed by Reuters had predicted 8.0 million unfilled positions. Vacancies have declined by 1.3 million over the year but remain above the 2019 average. The drop in job openings was most significant in the professional and business services sector, which lost 225,000 positions. Healthcare and social assistance vacancies fell by 180,000, and the finance and insurance sector saw a reduction of 136,000 open positions. Conversely, the arts, entertainment, and recreation sector gained 65,000 unfilled positions. The job openings rate decreased to 4.5 percent from 4.9 percent in November.
Cautious business sentiment
Businesses with 10 to 49 employees experienced the largest decline in vacancies, followed by companies with 50 to 249 workers. The reduction in job openings suggests there was no uplift from President Donald Trump’s Nov. 5 election victory, which had previously elevated business sentiment due to expectations of tax cuts and a less stringent regulatory environment. Uncertainty regarding the new administration’s policies—such as broad tariffs on goods from key trading partners and mass deportations of undocumented migrants—may have contributed to a more cautious business climate.
