4E Observation: The resonance of safe-haven and interest rate cut expectations, gold has risen over 15.1% this year, reaching a new high

During the Asian trading session on Tuesday, spot gold once again broke through the key $3000 mark, reaching a historic high of $3028. As a traditional safe-haven asset, gold has seen strong buying interest since Trump took office in January, amid escalating global trade tensions, prompting gold prices to hit historical highs 14 times. After a cumulative increase of 27% in 2024, gold has risen over 15.19% so far this year.

Escalating Trade Concerns Boost Safe-Haven Demand

The threat of tariff policies is one of the driving factors behind the recent surge in gold prices. The unpredictable trade policies of the United States have made gold a favored asset for investors amid geopolitical and economic turmoil.

This year, the U.S. has continuously imposed tariffs on major trading partners such as China, Mexico, and Canada, and has levied a 25% tariff on all steel and aluminum imports into the U.S. The U.S. government's "tariff stick" has provoked a fierce backlash in global trade policies. The European Commission stated on the 12th that a "strong response" has become the only "cure," imposing tariffs on $26 billion worth of U.S. goods starting next month. Canada has reacted even more swiftly, announcing retaliatory tariffs on $29.8 billion worth of U.S. goods starting March 13.

There are no winners in a trade war; the global economy bears the brunt, increasing vulnerability and darkening economic prospects. With global stock markets plummeting, market participants have turned to seek safe-haven assets, making gold the preferred destination for capital inflows.

At the same time, Trump has used the threat of tariffs as a bargaining chip, and his erratic policy actions and statements have continuously eroded global market confidence. The market is not afraid of bad news but dislikes uncertainty. The upward trend in gold prices this year closely aligns with the timing of escalating trade conflicts, highlighting the direct impact of tariff policy uncertainty on gold prices.

Growing Concerns Over U.S. Recession Weigh on Market Confidence

The weakening momentum of U.S. economic growth has also provided upward momentum for gold. Data released by the U.S. Department of Commerce on Monday showed that February retail sales fell far short of expectations, adding to signals that consumers are reducing spending, deepening concerns about a slowdown in consumer spending. Previous data indicated that the U.S. consumer confidence index has declined for three consecutive months. For the crucial services sector of the U.S. economy, last week's preliminary February services PMI was reported at 49.7, not only falling short of market expectations but also dropping below the expansion threshold for the first time since January 2023, signaling a bleaker economic outlook.

Meanwhile, the trade war has further raised inflation expectations by pushing up the prices of imported goods, while the U.S. government's layoff plans, which have seen thousands of federal employees dismissed, have exacerbated market concerns about economic growth prospects. Investors have developed a "heightened sense of caution" regarding U.S. stocks, leading to a concentration of funds in gold.

Safe-Haven Demand and Rate Cuts Support Gold Prices for Continued Rise

The U.S. economy is facing a "triple whammy" of tariffs, government layoffs, and consumer tightening, shaking the confidence of businesses, consumers, and workers, and increasing recession risks. The market widely expects the Federal Reserve to implement multiple rate cuts in 2025 to stimulate economic growth, with the latest FedWatch predictions indicating that the next rate cut could come as early as June. Expectations of liquidity easing and a declining dollar index will support a stronger gold price.

Additionally, since the Russia-Ukraine conflict, Western nations have frozen Russian central bank assets, and central banks around the world have begun to intentionally move away from dollar reserves, shifting their focus to gold. Demand for gold purchases from central banks has continued to grow, surpassing 1000 tons for three consecutive years.

Various signs indicate that the gold market is entering a new cycle dominated by risk premiums, with many market institutions generally expecting that strong buying power may drive gold prices higher in the medium to long term.

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