How long will gold prices rise on US tariff fears?

Dubai: The spot price of gold worldwide may have been highly volatile off late and choppy with traders reassessing the impacts of the US President Trump’s tariff policies, but there is no denying the fact that the yellow metal keeps closing in on its all-time high price of $2,943 – much to the dismay of buyers. 

Last week, gold traded between $2,854 and $2,943 in the week, but closed with a loss of 1.57 per cent on Friday but managed to eke out a weekly gain of around 1 per cent to post a seventh consecutive weekly gain. But how long will prices keep rising? Will prices drop to buyer-friendly levels anytime soon?

Recent developments regarding US tariffs have added a layer of uncertainty to the global economy, which in turn, drives investors to seek the safe haven of gold. The announcement of potential tariffs on Chinese imports and ongoing geopolitical tensions have contributed to heightened fears of inflation and market volatility. Check the latest rates here.

Historically, gold has performed well during times of economic and political instability, with many traders turning to it as a hedge against a weakening dollar or stock market instability. “In this current backdrop, it's likely that the upward pressure on gold prices will continue, especially in the short term,” Georgina Effel, a Dubai-based precious metals retail analyst.

Mixed signals

“However, there are mixed signals that may temper the extent of gold’s rally. While concerns about global trade and tariffs continue to drive market uncertainty, the US government’s response, including more modest tariffs and economic support packages, could alleviate some of the fears surrounding prolonged economic disruption.”

Additionally, President Trump’s Ukraine peace initiative has raised expectations that tensions could ease, potentially taking some of the wind out of gold’s sails, noted Zubair Shakeel, an Abu Dhabi-based investment manager. “As a result, while gold prices may still see increases, the pace could slow if political climates stabilize or if inflation fears subside.

“In the coming weeks, traders will also be looking closely at the economic data from the US. Sluggish growth or disappointing numbers could still offer the precious metal a boost, especially if the Federal Reserve signals further dovish policies to support economic growth. Conversely, stronger-than-expected data could provide some relief to the dollar and reduce the demand for gold as a safe haven.”

Bottom line? 

President Trump’s Ukraine peace initiative and reciprocal tariffs turning out to be less severe than feared are negative developments for the metal, agreed Effel and Shakeel. At the same time, disappointing economic data from the world’s largest economy, the US, are supportive for the metal. 

The dollar is likely to be under pressure on the proposed Ukraine peace talks, which may also support the metal. Overall, on the balance, gold is well placed to extend its ongoing rally on macroeconomic and political uncertainties. However, buying the dips is preferred over chasing this rally as Trump’s mild tariff stance is a big negative factor for the metal, the industry experts further noted.