Gold prices briefly soared above $3,490 per ounce on Tuesday, hitting a new record before settling around the same level. The surge in gold’s value was largely driven by increased demand for safe-haven assets, as investors flocked to the precious metal following President Donald Trump’s changing tariff statements and his escalating criticism of US Federal Reserve Chairman Jerome Powell.
Although Trump announced a 90-day pause in his reciprocal tariffs on China, global stock markets have already been significantly impacted, and investors are questioning whether this pause will be enough to calm the market. Over the course of this week, gold prices have surged by 5.7%, and by 14.2% this month. So far in 2025, the precious metal has risen nearly 31%.
Factors Behind the Gold Rally
One of the most significant factors contributing to the current rally in gold is President Trump’s increasing scrutiny of the Federal Reserve. Trump has criticized Fed Chair Jerome Powell for not lowering interest rates more quickly, despite inflation subsiding. In a post on his social media platform, Truth Social, Trump argued that “preemptive cuts” in interest rates are necessary, claiming that with energy and food prices falling, there is “virtually no inflation.” Trump also suggested that the economy could slow unless Powell acts swiftly to reduce rates.
Additionally, Trump has reportedly considered the possibility of firing Powell, although the Federal Reserve Chair is an independent role, and legally, Powell cannot be removed without cause. Currently, the US Supreme Court is reviewing a case that could make it easier for the president to dismiss Powell.
Trump’s remarks have raised concerns about the potential politicization of US monetary policy, which could undermine the Fed’s credibility and damage investor confidence. These uncertainties have driven investors toward safe-haven assets, such as gold and silver, with the latter also seeing a 1.3% increase this week.
Global Trade Tensions and the Dollar’s Decline
In addition to concerns about US monetary policy, a weakening US dollar and escalating global trade tensions have further fueled demand for gold. Tensions between the US and both the European Union and China continue to rise, with the US imposing tariffs as high as 245% on Chinese imports, while China has retaliated with a 125% levy on US goods.
The trade dispute has intensified with Trump launching a probe into US critical minerals imports from China, and the situation could deteriorate further in the coming weeks. Such developments could continue to support the rally in gold prices as investors seek refuge in the metal amid global economic uncertainties.
Supply Concerns and Long-Term Outlook
While global gold supply remains relatively robust, there are ongoing concerns about aging mines, depleting reserves, and declining ore grades. These factors could contribute to upward pressure on gold prices over the long term, particularly as demand for the metal continues to rise in uncertain times.
In conclusion, the current rally in gold prices is driven by a mix of factors, including geopolitical tensions, concerns over US monetary policy, and ongoing economic uncertainties. As the market responds to these dynamics, gold’s role as a safe-haven asset continues to solidify, and its price is expected to remain volatile as these global factors unfold.
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