By Daksh Grover
(Reuters) – Gold prices jumped 1% on Wednesday, continuing their record rally, driven by safe-haven demand amid the escalating U.S.-China trade war, while the spotlight was also on payrolls data from the world’s largest economy.
Spot gold rose 0.9% to $2,867.59 per ounce by 0906 GMT, after rising 1% and hitting a record high of $2,869.68 earlier in the session. U.S. gold futures gained 0.7% to $2,895.
China imposed tariffs on U.S. imports in a prompt retaliation to newly introduced U.S. duties on Chinese goods, reigniting the trade war between the world’s two largest economies, while U.S. President Donald Trump stated he is in no rush to speak with President Xi Jinping to de-escalate tensions.
“The potential economic consequences of a trade war between the U.S. and China are causing investors to fear a global recession and rising inflation,” said Dominik Sperzel, head of trading at Heraeus Metals Germany.
Meanwhile, three Federal Reserve officials warned that Trump’s trade tariffs could drive inflation, with one suggesting that uncertainty over price outlooks warrants slower interest rate cuts. Investors this week are watching out for the ADP employment report and the payrolls report, which could shed further clues on the U.S. rate path.
Bullion is considered an inflation hedge, but higher interest rates could dampen its appeal as the metal yields no interest.
“Gold is overbought and needs to correct,” said StoneX analyst Rhona O’Connell, adding “there is still scope for further upside, but barring any black swans we still expect to see the price topping out this year.”
Gold’s relative strength index is at 76, indicating that the price has surpassed the “overbought” territory that starts at 70. [TECH/C]
Meanwhile, global gold demand rose 1% to a record 4,974.5 metric tons in 2024, driven by higher investment and increased central bank purchases in the fourth quarter, according to the World Gold Council.
Spot silver rose 1.1% to $32.44 per ounce, platinum gained 1.3% to $976.05 and palladium added 0.8% to $998.00.
(Reporting by Daksh Grover in Bengaluru; Editing by Mrigank Dhaniwala)
