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Gold prices reached an unprecedented high on Thursday, climbing to $2,798 per troy ounce as investors grow increasingly anxious about potential US tariffs and an unusual market dynamic between London and New York.
The precious metal’s benchmark price has surged 7 per cent this year, driven by traders seeking protection against possible shifts in US trade policy. The market’s apprehension stems from President Donald Trump’s threat to impose 25 per cent tariffs on all Canadian and Mexican imports starting Saturday, raising concerns that gold, traditionally exempt from import duties, might be affected.
Trading patterns have shown a remarkable shift, with traders accumulating substantial bullion stockpiles on the New York commodity exchange (Comex). Since the US election, inventories have experienced a dramatic 75 per cent increase, with the stockpile value reaching $85 billion, representing over 30.4 million troy ounces.
This aggressive stockpiling in New York has created a significant shortage in London, resulting in withdrawal delays of four to eight weeks at the Bank of England. The situation has been further amplified by a weakening US dollar, making gold more attractive to investors using other currencies.
Market sentiment remains distinctly bullish, evidenced by gold futures short positions falling to their lowest levels since April 2020, according to Commodity Futures Trading Commission data. Suki Cooper, analyst at Standard Chartered, notes that while gold prices are expected to reach new highs in the coming weeks, the rally might lose momentum later in the year, particularly if anticipated rate cuts materialise in the first half of 2024.
MUFG analysts have indicated strong potential for further price increases in the short term, as investors increasingly view gold as a hedge against geopolitical uncertainties associated with the Trump administration. The continued purchase of bullion by emerging market central banks adds additional support to the market’s upward trajectory
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