Prime Highlights:

·         Gold prices reached a record high of $3,306 an ounce amid increasing global uncertainty.

·         The rally is underpinned by escalating U.S.-China trade tensions and a declining U.S. dollar.

Key Facts:

·         Spot gold rose 2.3%, or $76.17, to close at $3,306.

·         A decline of 0.65% in the U.S. dollar index also helped make gold more attractive.

Key Background:

Gold prices have an all-time record, with the spot gold selling at $3,306 per ounce. It is a rapid increase from years past, following increased global uncertainty. Amongst the largest cause of the upward surge is the increasing United States-China trade tension. The tensions, in which the two countries imposed draconian tariffs on China’s exports, raised fears about economic recession and led investors into safe-haven assets such as gold.

The sinking US dollar is also the keystone of the rally. The dollar index is at its weakest in over one year, and gold is increasingly an effective hedge against currency debasement. As the dollar falls, it is cheaper for buyers who hold other currencies than the US dollar, making demands even more formidable.

In addition, market players expect more interest rate cuts from the U.S. Federal Reserve, and this makes gold a more attractive investment. With decreasing interest rates, the cost of holding zero-paying securities such as gold is reduced, and hence the metal becomes more attractive. Central banks around the world have been buying gold reserves, putting a bid on prices.

Even as a new record high, gold is subject to the unpredictability of U.S. trade policy and mood of global economics. Though geopolitical tensions still remain a source of support for gold as a safe-haven investment, a settlement of the trade war or even a notable shift in global economic policies can potentially have a role to influence gold prices over the near term.