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Gold prices soared to fresh record highs on Tuesday, underpinned by growing investor concerns over U.S. Federal Reserve independence and intensifying U.S.-China trade tensions.
As of 09:15 ET (13:15 GMT):
- Spot Gold was up 0.6% at $3,442.48 per ounce
- Gold Futures (June) surged 0.9% to $3,455.90 per ounce
Earlier in the session, gold briefly touched a record $4,500 an ounce, marking its fourth straight all-time high and building on Monday’s 3% surge.
Drivers of the Rally
1. Trump vs. the Fed: Market Jitters Deepen
The ongoing rally is driven largely by safe-haven flows as political and monetary uncertainties weigh on global sentiment.
- President Donald Trump has renewed criticism of Fed Chair Jerome Powell, publicly pressuring the central bank to cut interest rates.
- Trump’s threat to remove Powell has raised alarms about the independence of the Federal Reserve, a cornerstone of U.S. economic credibility.
Fed Chair Powell, meanwhile, has reaffirmed a cautious stance, citing tariff-driven inflation and economic uncertainty as reasons for delaying rate cuts.
2. Weak Dollar Adds Fuel
- The U.S. dollar index has fallen to a three-year low, making gold more attractive for holders of other currencies.
- This currency weakness is compounded by political pressure on the Fed and broad investor skepticism about U.S. fiscal and trade policy.
3. ETF Demand and Shrinking Inventories
- Gold-backed exchange-traded funds (ETFs) are now holding record-high dollar value positions, despite notching their highest tonnage since September 2023.
- COMEX gold inventories have dropped by nearly 2 million ounces since early April to just under 43.1 million ounces.
- Analysts point to strong physical demand and the recent exclusion of gold from U.S. tariffs, which has boosted arbitrage into New York.
Geopolitical Risk: U.S.-China Trade War Escalates
Tensions between the U.S. and China remain a major market risk:
- Beijing warned that countries aligning too closely with U.S. trade terms could face “reciprocal countermeasures.”
- The U.S. currently has tariffs of up to 145% on Chinese goods, which China has met with retaliatory duties.
- The Chinese Commerce Ministry also accused Washington of using economic tools as “coercion.”
Such uncertainty has increased demand for safe-haven assets like gold, even as riskier sectors remain under pressure.
Other Precious Metals
- Silver Futures: ▲ 0.3% to $32.620/oz
- Platinum Futures: ▼ 0.6% to $961.85/oz
Outlook
With central bank independence in question, ETF inflows at record levels, and geopolitical tensions rising, gold may continue to find support even at elevated levels. Analysts are watching closely for any escalation in Fed-related news or trade disputes, which could push bullion further into uncharted territory.
