The recent US-China trade war has had numerous
ramifications. To start, economies have contracted, supply chains have been
disrupted, and corporate costs have risen significantly. Additionally, factory
activity has declined in some countries, many currencies have depreciated, and
companies have lost trillions in stock market capitalization.
Surprisingly, one asset has risen despite all the chaos:
gold. A gram of gold now costs over $100, a sharp rise from its pre-trade war
price of around $75/gram. Several factors have contributed to this increase,
including the ones discussed below.
●
Escalating Trade Tensions and Tariffs
Tariffs and trade tensions between the US and China have
been escalating at an unprecedented rate, ever since Trump’s administration
imposed a new wave of tariffs. These have made goods from both countries more
expensive, which is a cause for concern for investors. Remember, product prices
can impact a wide range of factors, from consumer behavior to corporate
profits.
As the situation worsens, some have opted to reduce their
risk exposure by copying the strategies of expert traders and investors. Before
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Most of the investors are shifting to gold, which is a conventional safe-haven
asset.
●
Weakening Currencies
Weakening global currencies are another aspect that’s
fueling gold’s ascent. The Chinese yuan and the US dollar have experienced the
most notable depreciations, with the RMB leading the pack. By late April 2025,
the yuan had experienced the worst fall since 2019, according to
Bloomberg. Other currencies have also been affected, including the New Zealand
Dollar, the Japanese Yen, and the Russian Ruble.
The price of gold is inversely proportional to the value of
major currencies, such as the USD. When such currencies decline, investors lose
confidence and seek refuge in gold, as this precious metal is not inherently
tied to any specific government or economy. And increasing demand drives gold
prices through the roof.
●
Anticipated Global Economic Slowdown
Investors are gradually losing confidence and expecting a
global economic shutdown as the US-China standoff persists. And experts
continue to fuel the fire by insisting that things could get worse if the
globe’s largest economies, the US and China, don’t find a common ground soon
enough. Unfortunately, none of these powerful nations seems eager to negotiate
or back down.
As the global economic slowdown continues to be a
significant threat, investors are shifting from riskier assets, such as company
stocks, to gold and other safer alternatives. This is causing a
substantial spike in gold prices, which is likely to continue if the situation
escalates further.
Will Gold Prices Keep Surging Indefinitely?
Expect the current gold rally to continue as long as trade
talks and negotiations between the US and China fail to calm down the
situation. But don’t sit and watch. For starters, consider shifting your
investment strategy to gold, which serves as a safer haven than stocks and
similar securities. Your assets will likely increase in value and generate
significant returns if the current bullish momentum persists.
Note that the price of gold won’t surge indefinitely. At
some point, diplomatic relations between China and the US might improve,
forcing the momentum to cool or reverse. So, keep a close eye on your
investments and adjust when the time is right
