Gold Surpasses Historical High as Dollar Strengthens
On Tuesday, Trump announced a 25% tariff on all steel and aluminum imports, prompting a swift response from global markets. Due to the increased trade uncertainty, gold prices soared to $2,921 per ounce, reaching a historical high. Simultaneously, the dollar benefitted from safe-haven demand, with the dollar index continuing to rise.
Gold Prices Hit Record High, Driven by Safe-Haven Demand
Trump's tariff policy has raised market concerns, leading investors to flock to safe-haven assets, with gold being a major beneficiary. On Tuesday, gold prices at one point surpassed $2,921 per ounce, setting a new record.
Market analysts point out that the rise in gold reflects investors' concerns about the potential economic impact of global trade tensions. As trade war risks increase, the market anticipates greater inflationary pressures on the global economy, and gold is often seen as an effective hedge against inflation and currency depreciation.
Additionally, rising global uncertainty has also driven funds into the gold market. Under the dominance of safe-haven sentiment, gold is cherished as a traditional safe asset, especially when major global economies face policy risks and an uncertain economic outlook.
Dollar Strengthens Alongside, Fed Policy Expectations Grow
Similar to gold, the dollar also performed strongly following Trump's announcement of tariff policies. The dollar index continued to rise on the foundation of the previous trading day's gains, with safe-haven capital flowing into dollar assets and boosting their value.
Analysts suggest that Trump's tariff measures might drive up inflation, especially amid rising steel and aluminum prices, which could prompt the Federal Reserve to adopt a more hawkish monetary policy. As the global reserve currency, the dollar benefits from the market's confidence in the stability of the US economy and policy certainty.
Furthermore, the rise of the dollar is also partially driven by global market safe-haven demands. With intensifying trade frictions, global investors are more inclined to hold dollars to hedge against market risks.
Market Reaction: Safe-Haven Sentiment Dominates, Gold and Dollar Both Winners
In the face of global trade uncertainty, the market is overall in a risk-averse mode, with the concurrent rise of gold and the dollar reflecting market sentiment directly. Investors are concerned that Trump's tariff policy could have a long-term impact on the global economy, leading them to choose safe assets to mitigate risks.
Hartmut Issel, Head of Equities and Credit in the Asia Pacific at UBS Wealth Management, commented:
“Amid policy uncertainty, the market's demand for safe-haven assets has surged, with the rise of gold and the dollar exemplifying this trend. Investors are seeking stable returns, and undoubtedly, gold and the dollar are the safest choices.”
As the market further absorbs Trump's tariff policies, investors will closely watch the policy reactions of major global economies and the future monetary policy direction of the Federal Reserve. Under the current environment, the safe-haven attributes of gold and the dollar may continue to be favored by the market.
