Gold was the clear winner of the growing global anxiety caused mainly by U.S. President Donald Trump and his trade wars. Since the beginning of the year, the gold price chart has seen a 30% increase, repeatedly reaching new all-time highs. As is often the case, gold mining stocks have risen in tandem.
For instance, Newmont’s shares are up 44% year-to-date, and Barrick Gold’s shares have risen 30%. This may not end the rally if Goldman Sachs' forecasts hold true. The bank predicts gold could reach $3,700 per ounce by the end of the year, and possibly $4,000 by mid-2026, especially if U.S.-China tensions remain unresolved.
What exactly has been driving this gold rush?
As mentioned above, uncertainty was triggered mainly by Trump's tariffs on a long list of countries in the name of improving the U.S. trade balance. The problem is that such protectionist measures risk fueling inflation at home, which could force the Fed to keep interest rates higher for longer.
In addition, Trump's increasingly vocal criticism of Fed Chairman Jerome Powell aims to pressure the central bank to ease monetary policy. Should the Fed relent (something it should not do, as it is supposed to operate independently of both Congress and the president), the consequences could be dire.
Coupled with another round of inflation rebound, this could seriously damage global confidence in the U.S. financial system. Judging by the continued fall in the U.S. dollar index and the growth in Treasury yields (unusual in turbulent times like the ones we are living in now), it is already happening.
Then there is the geopolitical wild card.
Trump claims to be negotiating peace deals in Ukraine and working to de-escalate tensions in the Middle East, especially with Iran. But so far, there has been little real progress. If these talks fail and escalation replaces resolution, investors will likely return to betting on safe-haven assets like gold.
Will the rally continue?
Despite the bullish forecasts from the banks, the market seems overheated with a correction looming. It is worth noting that approximately one-third of global gold demand comes from jewelers, who have recently started to cut back on their purchases. If geopolitical tensions ease slightly, a pullback could follow.
And then there is Bitcoin, often called “digital gold.” It has been rising along with gold recently, reviving the old narrative of cryptocurrencies as a safe-haven asset. Time will tell if Bitcoin can live up to that name, but with Trump in the picture, there's no doubt we'll have plenty more catalysts for price swings, in both directions.
This article was written by FL Contributors at www.forexlive.com. Read More Details
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