Gold Hits New Record at More Than $3,400 Per Ounce

The U.S. dollar index has weakened to a three-year low, contributing to gold demand.

Gold bars at a plant of gold refiner and bar manufacturer Argor-Heraeus SA in Mendrisio, Switzerland, on April 6, 2009. Sebastian Derungs/AFP via Getty Images

Spot gold prices broke the $3,400 per ounce barrier to hit a new high of $3,424.40 on Monday morning trade as a host of factors created uncertainty among investors, boosting the safe haven demand for the metal.

Tariffs continue to rock markets. The Trump administration has imposed 25 percent tariffs on all imports from Mexico and Canada. For all other partners, a 10 percent baseline tariff and custom reciprocal tariffs have been instituted after taking into account their trade barriers on the United States.

While the reciprocal tariffs have been paused for a period of 90 days to allow trade partners to renegotiate their trade imbalances with the United States, it’s not clear whether they will arrive at those deals within the allotted window and completely avoid the higher tariffs.

Adding more uncertainty to the markets was White House economic adviser Kevin Hassett’s statement on Friday that the Trump administration is reviewing its options with regard to firing Federal Reserve Chairman Jerome Powell.

His comments came a day after President Donald Trump accused Powell of “playing politics” by refusing to bring down interest rates.

Terminating the head of the central bank will be seen as a negative by investors as it puts the credibility of the institution into question. This could undermine global confidence in the U.S. dollar.

The U.S. dollar index has been weakening since mid-January, with the index currently at a three-year low. A weaker dollar makes gold cheaper for foreign buyers, thereby boosting demand and driving prices up.

Tariff concerns and a weaker U.S. dollar contributed to boosting the appeal of gold, pushing up prices of the bullion. Spot gold was trading at $3,418 as of 9:45 a.m. EDT, up 2.71 percent for the day.

Meanwhile, worries about a global tariff conflict have had the opposite effect on crude oil, pushing down prices. While gold futures are up by more than 8 percent since April 2, when reciprocal tariffs were announced, Brent crude oil futures have declined by nearly 12 percent.

On Monday, Brent crude was trading at $66.24 per barrel as of 9:45 a.m. EDT, down 2.53 percent for the day. The possibility of more supply being added to the market is putting downward pressure on prices.

Gold’s Next Move

Amid the rally in gold, investment firm UBS raised its target for the bullion, according to an April 11 post.

Gold’s “historic rally is being fueled by a perfect storm of factors like escalating geopolitical tensions, fears of inflation, and a shifting interest rate outlook—the combination of which has driven stronger-than-expected demand from ETFs and speculators,” the firm said.

“Aside from safe-haven demand and tactical speculators’ positioning, we see signs of a more structural shift in gold allocations—for example, Beijing allowing insurance funds to invest in gold and central banks systematically raising gold’s share of total reserves. This significantly supports demand.”

UBS raised its gold price forecast to $3,500 per oz. Over the longer term, a 5 percent asset allocation to gold within a USD balanced portfolio is an optimal diversification strategy, it said.

However, the company warned that some factors could impede the surge in prices. This includes the world going back to more cooperative trade relations, easing geopolitical tensions, and a significant improvement in the macro and fiscal metrics of the United States.

Yvonne Blaszczyk, CEO of precious metals investment company BMG Group, is even more bullish on the yellow metal, predicting gold prices to hit $4,000 per ounce by the end of this year, according to an April 8 post.

“Gold is going to go up in value, the price is going to rise dramatically, and it will continue [to] rise for [a] variety of reasons,” she said.

“Gold has a basic ability to withstand any kind of a turmoil, whether it is financial, geopolitical, or any cataclysm. I follow central banks, and they are accumulating gold. That’s a very significant factor in understanding where gold is.”

Meanwhile, investor demand for gold is surging, according to a recent report from the World Gold Council. In March, inflows into physically backed gold exchange-traded funds continued, with “positive demand witnessed across all regions,” it said.

Global inflows in March totaled $8.6 billion, with North America making up 76 percent of the inflow by investing $6.5 billion in the market.

The World Gold Council attributed the higher North American demand to the strong price momentum of gold, yields remaining range-bound, tariff uncertainty, and a decline in the U.S. dollar.

In addition, “equity pullbacks, due to growth concerns and market liquidity worries,” boosted the demand for safe haven assets such as gold, the group said.