Gold futures have surged dramatically over the last three trading days, with the most active June contract gaining approximately $254. After rising $101 on Wednesday, $94.40 yesterday, and $60.70 today, the most active June contract is now fixed at $3,254.90.
Gold's historic rise can be attributed to the escalating tariff conflict between the United States and China. This has triggered significant dollar weakness which, combined with traders bidding gold prices higher due to overwhelming bullish sentiment, has resulted in the largest one-week percentage gain since March 2020, the largest four-day percentage gain since March 2020, and both a new record high and closing price. Gold futures have gained roughly $590 or 22.55% year-to-date.
Market participants witnessed gold on a virtual price roller coaster, plunging from $3,196 on Thursday, April 3 to a low of $2,988.60 on Tuesday of this week. In just three trading days, gold prices plummeted by $208. Analysts have described this sharp decline as "largely unintuitive," occurring within a cross-asset selloff where profits from earlier gold gains essentially carried and covered losses from a massive selloff in equities.
Even more remarkable was the recovery during the final three trading days this week. June gold opened at $2,998 on Wednesday and as of 5:40 PM ET is fixed at a record-closing price of $3,254.90. The massive gains began after President Trump announced a 90-day pause on tariffs that were set to begin at midnight on Wednesday. This pause applied to most countries; however, China was notably excluded.
Trump stated, "Based on the lack of respect that China has shown to the World's Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately... At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable."
Today, China retaliated by raising its tariff on imports from the United States to 125%, just one day after Trump raised the import tax on goods from China to 145%. These moves by both countries have undoubtedly heightened tensions and escalated the trade war to unprecedented levels.
Gold prices traditionally thrive during periods of uncertainty, and the recent trade conflict has created an exceptionally high level of economic unpredictability. With unclear outcomes regarding U.S. negotiations for new trade agreements with other countries and the deepening trade conflict with China, this economic uncertainty will likely continue to fuel higher gold prices.
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