Geopolitical uncertainty and rising inflation expectations have driven the price of gold to record levels.
Yesterday, the price of gold rose again, reaching new record highs amid growing concerns about the potential consequences of United States (U.S.) tariff policies. Yesterday morning, the price of 31.1 grams (one ounce) of gold on the London exchange rose above 2.900 dollars for the first time.
Specifically, late yesterday morning, 31.1 grams of gold was also traded at a rate of 2.906.30 dollars in London. A year ago, a unit of the precious metal cost only about 2.000 dollars. The price has been steadily rising since mid-December last year, increasing by approximately 12% during this period.
The price of gold is also at a record high in euros. Yesterday, one ounce cost 2.814.35 euros, which is higher than ever before.
A safe haven
“The latest tightening of U.S. trade policy is causing uncertainty in the markets,” said precious metals trader Alexander Zumpfe from the German company Heraeus. He explained the increased demand for gold by noting that it is considered a safe investment.
U.S. President Donald Trump announced over the weekend that he would impose a 25% tariff on all imports of steel and aluminum into the U.S. Details are expected to be released at the beginning of this week.
Ricardo Evangelista, an analyst at the Luxembourg-based company ActivTrades, estimated that demand for gold is currently rising for two main reasons: concerns about the potential effects of the new U.S. administration’s protectionist stance on the global economy and inflation in the U.S. Many investors see gold as a hedge against inflation.
Central banks strengthen gold reserves
Zumpfe also pointed to the continued demand for gold from central banks. Several central banks increased their gold reserves last year to become less dependent on the dollar as the world’s reserve currency. Zumpfe emphasized that China’s central bank increased its gold reserves again in January.
If geopolitical uncertainty persists and inflation expectations rise, the upward trend in gold prices could continue. “We believe that an increase towards the psychologically important level of 3.000 dollarsper ounce is possible,” added Zumpfe.
