Gold prices are experiencing a notable surge, trading around $3,123 per ounce as of Thursday, a $40 or 1.29% increase from the previous day. In India, the gold rate has risen to ₹93,380. Here’s why the precious metal is gaining traction:
Bond Market Rout and Rising Yields
The recent surge in gold prices is largely due to a bond market rout triggered by President Trump’s tariff implementation. On Tuesday, the bond market saw significant selling pressure on U.S. Treasuries, which pushed bond prices lower and bond yields higher. The 10-year U.S. Treasury yield spiked towards 4.5%, marking a six-week high.
This movement in the bond market is fueling a demand for gold as investors seek safe-haven assets. Gold is traditionally viewed as a protective asset during times of financial instability, and the bond market’s volatility has sparked renewed interest in it.
Escalating U.S.-China Trade Tensions
Gold’s price recovery is also driven by escalating U.S.-China trade tensions. President Trump’s decision to increase tariffs on Chinese imports to 125%, following China’s own tariff hikes on U.S. goods, has raised concerns over the potential for a broader trade war. The ongoing back-and-forth tariff hikes between the two largest economies have contributed to market uncertainty.
Although Trump has temporarily reduced duties to 10% for a 90-day period to facilitate trade talks, the broader picture remains tense. With no clear resolution in sight, the trade war concerns are likely to continue to support the demand for gold as a hedge against global economic volatility.
Investor Nervousness and Safe-Haven Demand
As markets react to the escalating trade war and fears over economic instability, investors are turning to gold as a safe-haven asset. Gold has long been seen as a store of value in times of financial uncertainty, and with rising inflation and slower growth expectations, its appeal as a protective investment continues to grow.
Inflation and Economic Growth Concerns
The latest Federal Open Market Committee (FOMC) minutes revealed near-unanimous concerns over rising inflation and slower economic growth in the U.S. This has added to the nervousness in the markets, with investors closely watching U.S. inflation data, including the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports. Higher inflation can erode the value of fiat currencies, making gold a more attractive alternative.
Gold-Backed ETF Inflows
The World Gold Council recently reported that gold-backed exchange-traded funds (ETFs) saw substantial inflows of 226.5 metric tons, worth $21.1 billion, in the first quarter of 2025. This indicates strong investor demand for gold in a time of uncertainty, further boosting its price.
Conclusion
The current surge in gold prices reflects a combination of factors: the turmoil in the bond market, escalating U.S.-China trade tensions, rising inflation concerns, and increased investor interest in gold-backed ETFs. As global uncertainty continues, gold is likely to remain a safe-haven investment, and its price could continue to rise in response to further economic or geopolitical turbulence.
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