Appetite for the yellow metal reached a record high as investors and central banks increased buying pressure on the bullion.
Gold soared to an astonishing peak of $3,073.30 per ounce amid geopolitical uncertainties.
The precious metal is on track to have its best quarterly performance since 1986 after rising more than 17% this quarter.
Markets across the globe had a rough week as the escalation of the feud between the US and China tilted in Trump’s favor when he issued a retrospective 25% tariff on auto imports, which he announced over social media.
Global automakers have warned that the world is heading toward unfathomable hikes in the costs of automobiles. The world now stands on the precipice of another trade war, with fuel prices on the brink of skyrocketing due to newly imposed tariffs. The widening global trade war is elevating market chaos and disorder.
Consequently, the yellow metal serves as a currency, commodity, and financial asset, each of which helps to hedge against risk and inflation. The fundamental factors that affect gold’s price include changes in the dollar’s valuation, the risk of defaults in lending, and variations in foreign assets.
Attributes underlying the sphere of the commodity are influenced not only by retail sales but also by industry consumption, extraction, and reprocessing of materials.
The yellow metal is also largely influenced by the U.S. Fed’s financial policy. According to the Fed’s meeting in March, the federal funds interest rate target range will be maintained between 4.25% and 4.5%. Additionally, the Fed stated that a gradual slowdown is expected in April.
There was a slight increase in gold prices and a decrease in the dollar’s strength because of this shift, along with the Fed’s caution. These changes are consistent with the expected cuts in interest rates by the Federal Reserve for the remainder of the year.
Another element affecting the gold market comes from tariffs proposed by the Trump administration. If executed, these tariffs are likely to slow down economic growth in the U.S. and decrease the dollar’s value. If tariffs continue, this could damage the economy, cause distrust in U.S. dollar reserves, and, in turn, harm the credibility of the U.S. government.
The short-term focus of the U.S. administration and fiscal challenges have prompted central banks worldwide to reduce their gold reserves. In January, emerging economies led the purchase of 18 tons of gold bought by global central banks.
These countries have held massive gold reserves for quite some time, with some countries like the U.S., Germany, France, and Italy netting new gold purchases. This has increased interest in gold prices, resulting in more buy orders from investors.
Bank of America Bullish on the Yellow Metal
Bank of America (BofA) has increased its forecasts for the long-term average price of gold for this year and the next, while noting that the uncertainty caused by U.S. trade policies will continue to support prices in the short term.
In a note, BofA stated that gold is predicted to be priced at $3,063 per ounce (oz) in 2025 and $3,350/oz in 2026, an increase from its previous estimates of $2,750/oz and $2,625/oz, respectively.
Currently, spot gold is priced at $3,024/oz, with a year-to-date increase of over 15%. The surge this year has been fueled by fears of a recession and geopolitical tensions prompted by the economic policies of President Trump.
President Trump has instigated a new wave of tariffs marked by threats, reversals, and delays within minutes of deadlines, all while his trade team develops policies on the move.
In the note, the bank said that investment demand increases by 10%, and gold is then predicted to reach $3,500 an ounce within two years.
