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Gold hit a record high on Thursday as investors fretted over potential US tariffs and as a growing bullion stockpile in New York created a shortage in London.
The benchmark price rose to $2,798 per troy ounce, surpassing its October record and taking its gains to 7 per cent this year, as traders hedge against a potential shift in US trade policy.
US President Donald Trump has threatened to impose 25 per cent tariffs on all the country’s imports from Canada and Mexico from Saturday, triggering fear in the market that sweeping tariffs could apply to gold, which has historically been exempt from import duties.
Traders have been amassing a bullion stockpile on Comex, the New York commodity exchange, where inventories have shot up 75 per cent since the US election. The value of the stockpile rose to $85bn on Thursday, representing more than 30.4mn troy ounces, according to Comex data.
The surge into New York has depleted stocks of readily available gold in London, where there is currently a queue of four to eight weeks to withdraw it from the Bank of England.
A weakening US dollar also helped to fuel the gold rally, as it makes bullion cheaper to buy using other currencies.
Underscoring the market’s bullishness, short positions for gold futures have fallen to their lowest level since April 2020, according to data from the Commodity Futures Trading Commission, the US derivatives regulator.
“There is a lot of concern over tariffs,” said Suki Cooper, analyst at Standard Chartered. “Gold’s safe haven appeal really kicks in, when there is a broad-based asset risk.”
Typically gold benefits from lower interest rates, because bullion is a non-yielding asset, however that correlation has broken down in recent months.
Gold’s rise on Thursday came a day after the US Federal Reserve held interest rates steady and chair Jay Powell signalled caution over further rate cuts.
Cooper said that, while gold was likely to hit fresh highs in coming weeks, the rally could slow later in the year. “If we see further rate cuts in the first half of the year, that would support gold, then that tailwind will subside in the second half of the year,” she said.
Analysts at MUFG also told clients that gold had “the impetus to go much further in the short term”, as the market turned to gold as a geopolitical hedge against the uncertainties of the Trump administration.
“Also, emerging market central banks continue to be purchase bullion,” they added.