US-China Trade War Fuels Safe-Haven Demand
Gold jumped 1% in early Wednesday trading, reaching a record high of $2,869.68 before retreating slightly. U.S. gold futures advanced 0.7% to $2,895 as escalating tensions between the U.S. and China drove investors toward safe-haven assets.
China retaliated against newly imposed U.S. tariffs with its own set of trade restrictions, reigniting fears of a prolonged economic standoff. President Donald Trump stated he was in no rush to negotiate with Chinese President Xi Jinping, signaling that tensions may persist. The renewed trade war has heightened concerns over inflation and potential recession risks, pushing gold prices higher as traders hedge against economic uncertainty.
Federal Reserve Caution and Inflation Concerns
Three Federal Reserve officials warned this week that escalating tariffs could add to inflationary pressures. One policymaker suggested that uncertainty over inflation trends may warrant a more measured approach to rate cuts. Traders are closely watching economic data releases, including the ADP employment report and upcoming payroll figures, for further clues on the Fed’s interest rate path.
Gold, traditionally seen as an inflation hedge, benefits from rising consumer prices. However, higher interest rates could limit further gains by increasing the opportunity cost of holding non-yielding assets like bullion. The market remains sensitive to any signals from the Fed regarding its stance on inflation and monetary policy.
Bond Market Moves as Traders Await Jobs Data
The 10-year Treasury yield slipped 3 basis points to 4.478%, while the 2-year yield fell to 4.193%, reflecting growing caution among bond investors. The bond market’s movements align with expectations for key employment data later this week, which will provide insight into the strength of the U.S. labor market.
Federal Reserve Vice Chair Philip Jefferson stated that policymakers must carefully assess economic conditions before adjusting interest rates. While inflation is gradually easing, the Fed remains watchful, particularly as trade tensions introduce new economic risks.
Source: Gold News: Prices Surge on Trade War Fears, But RSI Signals Overbought—Reversal Ahead?
