Gold Prices Soar to Record High Near $3,500 Amid US-China Tensions and Fed Uncertainty

Investors Flock to Gold as Safe-Haven Asset

Gold prices have surged to an all-time high, nearing $3,500 per ounce, driven by rising geopolitical tensions, particularly between the US and China, and uncertainty surrounding the future of US monetary policy.

In early Asian trading on Tuesday, spot gold rose by 1.7% to $3,482.76 per ounce, while June gold futures climbed 1.9% to $3,491.20. This follows a more than 3% jump on Monday, continuing a streak of record-breaking gains over three consecutive sessions.

Trump vs The Fed: Policy Turmoil Sparks Market Volatility

The dramatic rise in gold has been fuelled by growing concerns over the independence of the US Federal Reserve. President Donald Trump has signalled intentions to overhaul the central bank and is reportedly considering whether he can dismiss Fed Chair Jerome Powell.

White House economic adviser Kevin Hassett confirmed that the President’s team is examining the legal possibility of removing Powell. Meanwhile, Trump has renewed pressure on the Fed to cut interest rates immediately, warning that a delay could slow down the US economy.

However, Powell has pushed back against these calls, stating last week that the Fed was not planning rate cuts in the near term due to inflation risks and ongoing trade-related economic instability.

Weak US Dollar Fuels Gold Demand

Adding to the upward pressure on gold, the US dollar has dropped to a three-year low, weakening against a basket of major currencies. A weaker dollar generally boosts gold’s appeal, as it makes the precious metal more affordable for international investors.

Heightened US-China Trade Tensions Elevate Risk

Gold’s rally is also being propelled by deepening trade tensions between the US and China. Beijing has warned nations against signing trade agreements with the US that could harm Chinese interests. The Ministry of Commerce accused Washington of using tariffs and financial sanctions to strong-arm trade partners.

The current trade war has already seen tariffs of up to 145% imposed by the US on Chinese goods, with China responding in kind. This increasingly hostile environment is prompting investors to seek refuge in assets like gold, which are traditionally seen as safe during periods of economic and political uncertainty.

Other Precious and Industrial Metals Also Rise

• Silver futures rose 0.8% to $32.795 an ounce.
• Platinum futures increased by 1% to $976.10 an ounce.
• Copper prices hit a two-week high, buoyed by the weakening US dollar, despite lingering concerns over US tariffs on Chinese imports.

Benchmark copper futures on the London Metal Exchange were up 1% to $9,311.60 per tonne, with May contracts gaining 1.1% to $4.7713 per pound.

Conclusion: A Turning Point for Global Markets?

The surge in gold prices signals a clear shift in investor sentiment, reflecting deep unease over geopolitical instability and economic policy uncertainty. As the standoff between the US and China escalates and confidence in central bank independence wavers, safe-haven demand is expected to remain strong.

Global markets are already reacting, with currency volatility, commodity price swings, and nervous equity trading. If tensions persist and the Federal Reserve comes under greater political pressure, the world could see more investors moving capital into gold and other stable assets.

This could have wide-reaching consequences—from disrupting inflation expectations to influencing interest rate policies in other countries. For now, gold’s record-breaking rise is a stark warning that global economic stability is hanging in a delicate balance.

Sources: (Investing.com, FT.com)