The price of gold reached a record high of more than $3,000/oz as mounting geopolitical tension and tariff threats continue to drive safe-haven demand for the precious metal.
Analysts say the uncertainty that underpins the rising gold price appears to be largely driven by concerns about US President Donald Trump’s potentially inflationary trade policies, with gold acting as a hedge against the volatile financial and geopolitical landscape.
Gold’s rally had appeared to slow over the past month, with World Gold Council market strategist John Reade predicting early last week that the price would remain range bound around $2,900/oz until later this year.
This all changed on Thursday when Trump threatened to impose a 200% tariff on European wine and spirit imports, causing a surge in the spot price of bullion overnight to $3,004.71/oz during morning trade, before pulling back to near its opening price of $2,983.35/oz.
The threat came after the EU imposed a 50% tariff on American whiskey exports in response to the blanket US tariff on steel and aluminium imports from all countries.
With the appetite for gold remaining strong, SA mining companies are set to continue benefiting this year.
Harmony Gold, SA’s largest gold producer by volume, reported a record high in its operating free cash flow and dividend payouts for the six months to end-December after the gold price climbed 23% in the second half of last year.
AngloGold Ashanti also reported a huge increase in free cash flow last year to $942m from $109m in 2023, while adjusted earnings before interest, depreciation, tax and amortisation surged 93%. Gold Fields cited gold prices as the primary driver behind its improved annual results, with profit for the year from continuing operations increasing 73% to $1.291bn.
The price of gold has risen 14% since the start of the year as Trump’s aggressive foreign policy stance and the escalating trade war between the US and its trade partners, particularly China, threaten to disrupt economies worldwide and fuel inflation.
On top of inflation, gold is seen as a hedge against political risk, with the conflict in the Middle East and Europe driving up safe-haven demand from investors and central banks.
Reuters quoted Russian President Vladimir Putin on Thursday saying that Russia supported a US proposal for a ceasefire in Ukraine in principle, but was seeking several clarifications and conditions — which appeared to rule out a quick end to the fighting.
Gold has been supported by growing expectations of monetary policy easing by the Federal Reserve after US data surprised with a softer-than-expected consumer price index on Wednesday. Interest rate cuts were a key driver of gold’s rally last year and seem set to continue to play a critical role as the Fed prepares to cut rates further in 2025. Typically, higher rates lead investors to favour interest-paying assets such as bonds, reducing demand for gold.
Trump’s potentially inflationary tariffs continue to pose a threat to this outlook, and a prolonged pause in cutting — let alone a reversal in monetary policy — would put pressure on investment demand.
However, IG market strategist Yeap Jun Rong forecasts that the gold price may continue to rise in the coming weeks. “The risk-off market stance reflects investors’ expectations that trade tensions are likely to get worse before cooling, and [they] are turning to safe-haven gold once again as a hedge against portfolio volatility,” Rong said.
“As we approach the second quarter, where reciprocal tariffs could trigger another wave of market turbulence, gold remains a compelling safe-haven asset in an environment where alternatives are scarce,” he said.
Additionally, some upside risk comes from the potential for Chinese bar and coin demand to improve, Reade said. “We’ve seen announcements from the Chinese insurance regulator, which is now permitting the 10 largest insurers in China to allocate some of their assets to gold. This could be a big component in the gold story in the balance of 2025 and potentially for years to come, because I’d expect it would be more than just those 10 life insurance companies.”
Last year gold recorded its best showing since 2010, outperforming all major asset classes based on indices from Bloomberg and the ICE benchmark administration.
Over the course of 2024 the gold price set 40 new record highs and gained 25.5% by year-end as global elections and heightened geopolitical risk pushed central banks and investors to the asset, offsetting a decline in consumer demand.
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