Recently, gold has become the most popular safe-haven asset in the market, especially against the backdrop of escalating global trade wars and slowing economic growth. In recent weeks, gold has outperformed other major assets, becoming the best performer in the "Trump trade." Spot gold prices have exceeded $2900 per ounce and reached a historical high of $2942.75 last week.
Since the beginning of the year, gold prices have been on the rise, accumulating gains of over 7%. In contrast, the S&P 500 index has risen less than 2% during the same period. Analysts note that gold tends to rise rapidly when global trade contracts. Historically, trade tensions during the COVID-19 pandemic and the global financial crisis have also led to a surge in gold prices.
Furthermore, the liquidity of gold is also affected by the flow of gold from the UK to the US, which has further driven up gold prices. Data shows that since the US election, the gold inventory at the New York Mercantile Exchange has increased by 116%. Meanwhile, the US has announced tariffs on steel and aluminum and is further considering implementing "reciprocal tariffs," matching the tariff rates of other countries. This policy may trigger more retaliations and increase trade war risks, which is beneficial for gold.
Analysts believe that trade wars not only inhibit global economic growth but may also drive up inflation, factors that typically have a positive impact on gold prices. As market concerns about the global economic outlook intensify, gold has become investors' preferred safe-haven.
Unlike gold, the performance of the US dollar and the 10-year US Treasury yield has declined. As the US tariff policy is implemented gradually, the demand for currencies such as the euro has increased, slowing the upward momentum of the dollar. Meanwhile, investors have started turning to government bonds to mitigate economic risks.
Gold's strong performance is not only driven by trade wars but also supported by the gold purchasing behavior of central banks. A report by the World Gold Council shows that central banks have been buying over 1,000 tons of gold for three consecutive years, further boosting gold demand.
An executive from a global gold-copper giant stated that the market is expressing demand for gold as a "safe haven," especially amidst increasing global economic and geopolitical uncertainties. As gold prices continually hit new historical highs, several banks have raised their gold price forecasts, with UBS and Citibank both adjusting their target prices to $3000 per ounce.
Gold's performance in the current global trade environment highlights its unique position as a safe-haven asset, especially as market uncertainty rises, continuing to attract investors' attention.
