Gold was climbing sharply in European trading on Monday, continuing a historic, record-setting advance toward $3,150. This increase occurs while the bullion is benefiting from safe-haven flows, due to increasing fears of a global tariff war. The trade war escalated even further, with the current tariff levels at their highest since World War II.
At the same time, market analysts caution that trade rerouting will be inevitable. With each successive imposition of such tariffs, their politically corrosive effectiveness will erode. The immediate impact has been significant. The tariffs imposed by the Trump administration have increased the trade-weighted average tariff rate on all US imports by approximately 5.5 to 6.0 percentage points.
The US Dollar is under heavy selling pressure in the currency markets. In fact, there are growing fears that these tariffs could spur inflation and cripple economic growth. Consequently, the EUR/USD pair continues to trade mostly unchanged just below the 1.0850 mark during Monday’s early European hours. The currency pair enjoys support from a generally weaker US Dollar. Buyers are remaining on the sidelines as they look forward to Germany’s initial inflation numbers and further announcements on reciprocal tariffs from President Trump.
These US economic concerns are helping boost the gold market. These fears have eroded the strength of the US Dollar and Treasury yields. All of these reasons make the precious metal very attractive as a safe-haven investment when the economy is volatile.
Though investor sentiment may be ruled by FOMO and the boom market mentality, investors should practice caution. The views and opinions expressed in this article by the authors are personal to the authors. These views do not necessarily represent the official view of FXStreet or its sponsors and advertisers. Disclaimer The author and FXStreet are not registered investment advisors. Please do not treat any information or opinions contained in the content as investment advice.
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