Investors have secured their funds in the precious metal amid the ongoing war in Ukraine, airstrikes in the Middle East and “mounting tensions” in the South China Sea.
President Trump’s tariffs on Canada and Mexico have caused the dollar to suffer a five-month low compared to the euro, so gold – shielded from any conflict or political decisions – has increasingly become a more appealing fund for many investors.
The impact of the 25% tariffs for steel and aluminium on the bordering nations of the US coupled with the doubling of import costs for Chinese goods also led to the US stock market spiralling in February.
Gold levels peaked at $3,028.24 today (18 March) and first surged to $3,000 on Friday 14 March.
The value of bullion has risen by 15% compared to this time last year and has accelerated due to continued conflict across the world. Meanwhile, the gold rush could continue on to hit $3,300 before the end of June, according to forecasts from asset management firm deVere Group.
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‘Capital is flooding into gold’
Nigel Green, CEO of deVere Group, said: “With tariffs being expanded, trade policies zigzagging, and concerns over inflation and an economic slowdown intensifying, capital is flooding into gold as a trusted store of value.
“Geopolitical flashpoints also continue to reinforce gold’s appeal. The ongoing conflict in Ukraine, renewed instability in the Middle East, and mounting tensions in the South China Sea are contributing to a risk-laden global landscape.”
Green added: “As military conflicts and diplomatic standoffs escalate, investors are increasingly viewing gold as an essential hedge against uncertainty.
“Meanwhile, disruptions in global trade routes, including those in the Red Sea, are further heightening inflationary risks, adding another layer of urgency to gold’s rapid ascent.”
‘History of being money since time immemorial’
Russ Mould, investment director at AJ Bell, said: “Gold itself offers no yield, has limited industrial use and comes with a cost of ownership, in the form of storage and insurance, so many portfolio builders will still fight shy of embracing the metal, especially when they can get returns from cash in the bank that currently exceed inflation.
“But gold is durable, has a history of being money since time immemorial and is difficult and expensive to produce, so it can be seen as a store of value at a time when inflation is eroding the purchasing power of money in the West.”
Mould added: “Supply of gold grows much more slowly than that of ‘money’ and it is just possible that the inflation seen in 2021 to 2023 is part of the bill for the interest rate cuts and additional quantitative easing and money creation deployed by central banks to see the globe through the pandemic.”
