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Gold enjoyed the best week of five years, and recorded the best week as investors rushed to the safety of one of the few shelters left in the global market in the wake of Donald Trump’s tariff blitz.
Bullion had climbed more than 6.5% by the end of Friday, reaching a new high of $3,237 per troy ounce. This is the biggest weekly profit since the early stages of the Covid-19 pandemic in March 2020.
The rise came as the US president’s trade war unleashed a market that had freed panic, and the rise came as stocks were pulled back from the US Treasury, a shelter in a normal era, stocks were nogginnet and the dollar fell to a three-year low against the euro.
“The widespread sale of US stocks and the Treasury has shaken up confidence in American assets and urged investors to seek gold security,” said Alexander Zumfe, bullion trader at Helleus.
“The rally is driven by a growing fear of a full-scale trade war,” he added, pointing to an increased risk of a recession, rising bond yields and weakening of the US dollar as a contributor.
Gold is in dollars, and is usually cheaper to buy in other currencies because US currencies are weaker.
The escalating world trade war has shaken up markets and contributed to uncertainty over the health of the US financial system. On Friday, Beijing returned to Washington and earned a 125% tariff on US imports.
“I’m holding money when I’m worried about the system breaking down,” said Peter Marine Jones, analyst at Peel Hunt. “It’s not surprising that it’s not just a safe haven at the Treasury, or just holding dollars in cash, it’s not as attractive as the previous crisis.”
Bullion is being driven this year by strong investors’ demand and physical purchases from central banks looking to diversify away from the dollar.
In the first quarter, there was the highest level of inflows into money-support exchange funds since the coronavirus pandemic.
Will Rhind, chief executive of ETF company Graniteshares, said his recent flight to gold was motivated by fear.
“We are in this very unusual situation where flights to traditional safe havens are not working,” he said, pointing to the Treasury yield. “In an environment where people are nervous about the market, prices are rising. That’s breaking the trust loop.”
This week, physical demand for gold is also strong, with buyers paying a greater premium on metals than international spot prices and showing strong demand.
UBS raised its gold price forecast for the second Friday of the year, reaching $3,500 per troy ounce over the next 12 months, up from the $3,000 forecast made at the beginning of the year.
“Additional demand from central banks, institutions and investors is expected following the current event,” UBS analysts wrote in a note to clients.
