Too late to buy gold?

Gold’s relentless climb toward record highs is no mystery for Mr Market. In a world where financial markets are dictated as much by fear as by fundamentals, it only means investors are once again flocking to the ultimate safe haven.

So, the recent surge in gold prices past the $2,950 per ounce threshold early this week only reflects deepening concerns over global economic stability, largely driven by escalating trade tensions under Trump’s shock-and-awe tariff policies.

While safe-haven demand has always been a dominant driver of gold prices, the current rally has been fueled by a cocktail of trade war fears, inflationary uncertainty, and a market grappling with the Fed’s interest rate outlook.

The immediate catalyst for gold’s rise is Trump’s renewed tariff threats on Canadian and Mexican imports, a move that has rattled investors worldwide. With a March 4 deadline looming, Trump has reiterated his stance that these tariffs will proceed “on time and on schedule,” despite diplomatic efforts by both nations to address border security concerns and curb fentanyl shipments into the US.

The market reaction has been swift—investors, fearing economic fallout and supply chain disruptions, have piled into gold as a hedge against uncertainty.

But it isn’t just geopolitical risks driving the gold rally. The structural realities of gold supply and demand are also playing a crucial role. Canada and Mexico are two of the world’s top gold and silver producers.

If Trump moves forward with tariffs that include these metals, it could significantly impact their production costs, potentially causing disruptions in supply.

Analysts have already warned that such a move could widen the price spread between US and London gold markets, further aggravating volatility.

Beyond trade concerns, the broader macroeconomic environment is also underpinning gold’s appeal. Investors are now waiting for the latest US Personal Consumption Expenditures (PCE) report, the Federal Reserve’s preferred measure of inflation.

Recent commentary from the San Francisco Fed suggests that the central bank remains poised to respond “strongly and systematically” to any signs of inflationary pressure. If inflation remains stubbornly high, the Fed might be forced to keep interest rates elevated longer than expected—a scenario that should, in theory, diminish gold’s appeal, given its lack of yield.

However, markets are not reacting in line with conventional wisdom. Despite the prospect of higher rates, gold continues to surge, underscoring the depth of uncertainty and the extent to which investors are prioritising safety over returns. This divergence speaks to broader anxieties about global economic stability, where investors are less concerned with opportunity cost and more focused on capital preservation.

Gold’s rally is also reflective of broader concerns about financial markets beyond the US. In the Eurozone, bond yields are rising amid speculation over a potential German defense fund, a development that could alter fiscal dynamics in the region.

Given the already fragile state of global markets, any unexpected policy shifts—whether in Europe, China, or the US—could further fuel risk aversion and sustain gold’s momentum.

The safe-haven rush isn’t limited to gold. Silver, platinum, and palladium have also seen significant movements, though none as dramatic as gold’s ascent. Silver, often considered gold’s more volatile cousin, has been oscillating around $32 per ounce, while platinum and palladium continue to face supply-side constraints. Yet, it is gold that remains the standout performer, its rally defying conventional market logic and reflecting a deeper unease among investors.

While history has shown that gold tends to perform well in times of geopolitical and economic turmoil, its current trajectory raises key questions. Are markets underestimating the potential fallout from Trump’s trade policies? Is the Fed’s tightening cycle still exerting its expected influence? And most importantly, is the safe-haven rush a temporary phenomenon, or does it signal a more prolonged shift in investor sentiment?

What is clear is that gold’s current rally is not driven by speculation alone—it is deeply rooted in the tangible fears of a fragile global economy.

Whether these fears materialise into a broader financial crisis or dissipate with shifting policy decisions remains to be seen. But for now, as long as uncertainty reigns, gold will likely continue its march toward uncharted territory.

So, is it too late to buy gold?

Copyright Business Recorder, 2025