Gold prices smashed through a major milestone on Thursday, briefly topping $3,000 (€2,764) per ounce for the first time in history, as investors fled riskier assets in response to escalating global trade tensions and mounting fears of stagflation.
The surge in gold futures, which rose 1.5% on Comex, was mirrored by spot gold jumping 1.9% to $2,988 (€2,752) per ounce—both setting fresh all-time highs.
The precious metal has now gained over 13% since the start of the year.
Analysts point to a confluence of economic and political headwinds driving the rally: the widening global trade war triggered by U.S. President Donald Trump’s aggressive tariff measures, a weakening U.S. dollar, and growing demand from central banks seeking safer reserves.
Trade War Fuels Haven Demand
Tensions intensified this week after Trump slapped 25% tariffs on all steel and aluminum imports and threatened a 200% tariff on European wine and spirits in retaliation for the EU’s planned duties on American whiskey. This triggered swift retaliatory measures from Canada and the EU.
With trade barriers rising and global cooperation faltering, fears of deglobalization and slower growth have grown louder. Many analysts now warn of a stagflationary environment—rising inflation coupled with economic stagnation—historically a bullish scenario for gold.
“Gold is being driven higher by classic haven demand, but this time it's coupled with inflation concerns and geopolitical risk," said Kyle Rodda, senior market analyst, to Euronews.
“Trump's trade and tax policies are driving flows into gold as central banks look to shift reserves away from Treasuries, while there are fears about the rising US debt load and the US economy's ability to service it.”
Dollar Weakness, Rate Cut Bets Add Fuel
Adding to gold's momentum is the slumping U.S. dollar.
The Dollar Index (DXY) has dropped more than 5% from its January peak, pressured by speculation that the Federal Reserve will cut interest rates as early as June.
Markets were further shaken by cooler-than-expected U.S. inflation data, reinforcing expectations of an earlier policy pivot by the Fed. While rate cuts tend to weaken the dollar and bolster non-yielding assets like gold, that dynamic could shift if the Fed is forced to maintain a hawkish stance to contain inflation amplified by trade tariffs.
Meanwhile, the euro’s recent strength, supported by expectations of a fiscal shift in the EU, has added further pressure on the greenback and prompted investors to reallocate away from U.S. assets.
Markets in Retreat as Gold Shines
While gold rallies, other assets are reeling.
The S&P 500 has slipped into correction territory, down 10% from its February high, as investor sentiment soured, particularly in growth-sensitive sectors like tech.
Energy markets are faring no better.
Crude oil prices remain near multi-year lows as the demand outlook dims and talks of a ceasefire raise the possibility of Russian oil re-entering the market. Benchmark WTI and Brent crude futures are down 7% and 8% this year, respectively, approaching their lowest levels since late 2021.
