Gold prices jumped to more than $3,350 an ounce on Friday. This increase was driven by heightened uncertainties in international trade and growing volatility in markets around the world. Traders are already betting on the shiny metal reaching $4,000 or beyond before year end. That pretty bullish outlook comes on the heels of recession fears spiking and key U.S. trade policies changing in dramatic, game-changing ways.
Gold prices are hitting an all-time high. Unsurprisingly, this increase comes at the same time the U.S. is contending with a $3.8 trillion tax-and-spend deal that just passed through Congress without any funding plan in sight. President Donald Trump has recently threatened major corporations with large tariffs. This decision has scrambled the financial environment for foreign partners. For instance, Trump warned Apple of a 25% tariff if it does not move iPhone production back to the United States. He further threatened 50% tariffs on the entire European Union as of June 1st.
As market conditions continue to evolve, a number of financial institutions have revised their outlooks for gold. In July, the French investment bank Société Générale predicted gold would top $4,000 an ounce by 2025. Last week, Goldman Sachs took a very courageous step. In worst case market scenarios, they propose gold will surpass $4,500 in the next 12 months.
Across the pond, the recent surge in gold prices has been correlated with increasing Treasury yields. When the 10-year Treasury yield sliced through 4.60%, it created a convoy of shock in yields and risk assets. When yields rise, that is usually a negative for gold because it makes holding a non-yielding asset less attractive. What’s happening today appears to be a real break from conventional market wisdom. Market analysts have noted that higher yields are providing the “rocket fuel” for gold as investors pile into the metal’s relative safety amid a growing wave of uncertainty.
Market traders know a storm when they see one, and that’s why they’re clamoring for gold like never before. The valuable metal acts as a hedge in times of economic turmoil. Its recent price action has easily passed the vibe check on that front. Market sentiment points to gold being able to continue climbing. This may be the case if fears of a recession persist and geopolitical tensions escalate.
“A trade war hits all of Trump’s economic goals in one shot. The Fed won’t cut rates, so Trump’s using tariffs to crash markets and force their hand. It’s not a mistake – it’s strategy.” – GSC Commodity Intelligence
Indeed, market analysts are hardly sleeping on these developments. Yet today, Trump’s administration appears to be rewriting the rules of global financial markets. The impact of such policies can be extreme. Such actions could paralyze the world economy while increasing gold’s luster for investors seeking safety in volatility.