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Demand for safe-haven asset gold is on the rise at a time when there's a lot of uncertainty surrounding the US trade policy because of the Donald Trump administration's aggressive reciprocal tariffs.
Spot gold hit a record high of USD 2,943 per ounce and Comex gold USD 2968 per ounce. The gold prices have inched up by about USD 300 over the past month or 11 per cent on a cumulative basis, hitting multiple fresh highs. Investors typically turn to bullion when market uncertainty in looming, hoping for a stable return from the safe-haven assets. Gold is heading towards USD 3000 per ounce and likely to cross USD 3080 in the January-March quarter of 2025, financial advisory firm Ventura Securities said in a note. The recent strength in the gold market stems from a mix of higher tariff safe-haven demand, geopolitical uncertainties, inflation concerns, and central bank policies besides continued strong demand from both central banks and retail investors. Gold has outperformed equities and bitcoins in 2025. "There are talks around about tariff on gold which also has sparked a rush for the physical metal in London, Switzerland and Asia to ship to the U.S. ahead of any new levy," Ventura Securities said. Gold is also making record highs on the back of increased demand from central banks for their reserves to maintain an expected surge in fiscal deficits. This, Ventura Securities, said it could "raise inflation manifold and probably a recessionary fear" across the globe. According to Ventura Securities, central banks worldwide acquired 1,045 tons of gold in 2024, marking the third consecutive year of purchases surpassing 1,000 tons. Over the last three years, central banks bought more gold than in the six years before 2022. US Federal Reserve Chair Jerome Powell who noted that US monetary policy had been sufficiently loosened after 100 basis points of rate cuts through 2024 (From 5.50 per cent to 4.50 per cent), could, however, be a limiting factor for gold. Elevated interest rates make other interest-rate sensitive investment assets lucrative. "Bigger gains in Gold are restricted due to strength in USD and interest rates are still elevated. Since US importers are facing inflation due to tariffs, the FED has less impetus to cut interest rates. High interest rates present more pressure for non-yielding assets like gold," Ventura Securities said. Still, Ventura Securities believes gold will continue to have volatility and so far as "uncertainty" prevails, it's likely to remain bullish. (ANI)
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