Gold Prices Surge as Concerns Mount Over Trump's Tariff Plans

Bullion Approaches Record High Amid Political and Economic Uncertainty

Gold prices climbed on Thursday as escalating concerns over U.S. President Donald Trump’s proposed reciprocal tariffs added to global market uncertainty. The increasing risk of a trade war, coupled with strong U.S. inflation data, has fueled demand for gold as a safe-haven asset.

Gold Nears Record High as Investors Seek Safety

Spot gold rose 0.4% to $2,913.47 per ounce as of 9:41 a.m. ET (1441 GMT), inching closer to its all-time high of $2,942.70, which was reached on Tuesday. U.S. gold futures also firmed 0.4% to $2,941.50.

The rally in gold prices has been driven by heightened geopolitical risks and economic concerns surrounding Trump’s trade policies. On Thursday, Trump announced plans to impose reciprocal tariffs on nations that impose duties on U.S. imports, a move that could further strain global trade relations.

Rising Inflation Strengthens Case for Fed Caution

Adding to market uncertainty, the latest U.S. Producer Price Index (PPI) data showed a 0.5% increase in January, surpassing forecasts. The stronger-than-expected inflation reading has reinforced expectations that the Federal Reserve will hold off on interest rate cuts until at least the second half of 2025.

"Political uncertainty and economic consequences are the dominant factors behind gold's rise," said Jeffrey Christian, managing partner at CPM Group. "The PPI data was neutral, but investors remain focused on the potential impact of Trump's trade policies on the broader economy."

Despite recent inflation data and cautious remarks from Federal Reserve Chair Jerome Powell, market sentiment remains resilient. Powell, in his second congressional testimony this week, reiterated that the central bank is in no rush to cut interest rates. While higher interest rates typically reduce gold’s appeal as a non-yielding asset, safe-haven demand has continued to drive bullion prices upward.

Gold’s Strength Casts a Shadow on Global Jewelry Demand

The sharp rally in gold prices has had mixed effects across global markets. In India, one of the largest gold-consuming nations, soaring prices have dampened jewelry demand during the wedding season. Meanwhile, in China, gold dealers have resorted to offering discounts to attract buyers.

Other Precious Metals See Mixed Movements

• Spot silver fell 0.5% to $32.06 per ounce.

• Platinum declined 0.6% to $986.60 per ounce.

• Palladium remained steady at $974.45 per ounce.

Canadian Investors Turn to Gold and Uranium Amid Trade Risks

TSX Gains as Investors Weigh U.S. Inflation Data

Canada’s S&P/TSX Composite Index opened higher on Thursday, mirroring gains on Wall Street, as investors analyzed the latest U.S. inflation report. However, growing concerns over potential U.S. tariffs have led Canadian investors to increase their exposure to gold and uranium stocks as protective measures against economic volatility.

Trade War Fears Drive Safe-Haven Demand

With 75% of Canada’s exports destined for the United States, Trump's tariff threats pose a significant risk to the Canadian economy. The White House is considering a 25% tariff on most Canadian imports starting in March, with steel and aluminum facing even steeper levies following an executive order signed on Monday.

"All this uncertainty around trade and geopolitical tensions has put gold back on the front burner," said Greg Taylor, portfolio manager at Purpose Investments. "Across our multi-asset funds, we have been increasing our gold holdings as a hedge against market volatility while also aiming for absolute returns."

Materials Sector Outperforms Amid Gold Rally

The Toronto Stock Exchange’s materials sector, which includes metal mining stocks, has surged nearly 15% year-to-date, driven by rising gold prices. Notably, shares of Agnico Eagle Mines Ltd. (AEM.TO) have soared 26.5% this year, reflecting heightened safe-haven demand.

Conclusion: Gold’s Outlook Remains Strong Amid Trade and Economic Uncertainty

Gold’s recent rally underscores its status as a preferred hedge against economic uncertainty, trade tensions, and inflation risks. While rising interest rates typically dampen gold’s appeal, the uncertainty surrounding Trump’s tariff policies and the potential fallout from trade disputes continue to support demand for bullion.

Investors remain watchful as the Federal Reserve signals caution on rate cuts, and geopolitical risks drive market sentiment. As concerns over global trade wars grow, gold’s role as a safe-haven asset remains firmly in focus.