Why gold prices are soaring amid Donald Trump’s tariff wars

The price of gold just keeps climbing.

And it has a lot to do with US President Donald Trump’s tariff wars.

The price of spot gold this week hit a record this week.

The price of the precious metal has risen 10 per cent this past year – after a 27 per cent increase in 2023.

But what happened? Why do gold prices keep soaring?

What happened?

As per Al Jazeera, gold broke the $2,900 (Rs 2.51 lakh) per ounce barrier for the first time this week.

Gold rose further on Tuesday to scale a new high of $2,942 (Rs 2.52 lakh) per ounce.

On Thursday, spot gold climbed to a record price of $2,942.70 (Rs 2.55 lakh) per ounce.

As per F_orbes,_ the price of gold has increased 44 per cent over the past year.

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That makes it the top performer across a dozen global asset classes as per BlackRock Investment Institute.

The S&P 500, on the other hand, has given a return of 22 per cent.

The development comes after Trump imposed a 25 percent tariff on steel and aluminium imports this week.

Trump is aiming to help struggling industries by increasing tariffs by 25 per cent “without exceptions or exemptions.”

However, he risks starting a trade war with Mexico, Canada and China.

“Our nation requires steel and aluminium to be made in America, not in foreign lands. We need to create in order to protect our country’s future,” Trump was quoted as saying by Al Jazeera.

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“It’s time for our great industries to come back to America. We want them back to America. This is the first of many.”

Why do gold prices keep soaring?

Gold is historically thought to be a safe haven asset.

Investors tend to flock to gold during times of turbulence.

Gold crossed $1,000 (Rs 86,000) per ounce during the 2008 financial crisis.

By 2011, gold was at the 1,900 (Rs 1.65 lakh) per ounce mark.

It finally climbed over $2,000 (Rs 1.73 lakh) during the COVID-19 pandemic in 2020.

A number of central banks including the People’s Bank of China, the Reserve Bank of India and the National Bank of Poland also have been snapping up gold over the past year.

According to the World Gold Council (WGC), central banks in 2024 purchased 1045 tonnes of gold – the third straight year they have done so.

That includes 53 tonnes of gold in November alone.

The central banks are doing so to guard against inflation and reduce foreign currency risks.

Gold also has historical advantages.

As per Al Jazeera, paper money’s worth drops because of inflation or overprinting.

However, gold being a scarce resource does not.

Also, unlike certain currencies, gold is used across the world.

“Gold is a highly liquid asset, which is no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time,” the World Gold Council (WGC) says on its website.

The future for gold also looks bright.

Forbes quoted JP Morgan Chase predicts gold will touch $2950 (2.56 lakh) per ounce by the end of 2025, while Goldman Sachs predicts it will hit $3,000 (2.6 lakh) target by mid-2026.

Citigroup says it will touch $3,000 (2.6 lakh) by the end of 2025.

The outlet quoted JPMorgan’s head of cross asset strategy Fabio Bassi as saying gold “clearly would benefit from universal tariffs.”

Goldman commodities strategist Lina Thomas said written about a “potentially persistent boost from elevated US policy uncertainty.”

With inputs from agencies