Gold Hits New Record Ahead of “Liberation Day”

Gold (XAU) continued to ascend to new heights on Monday, 31 March, marking the fourth session of successive record-hitting. The safe haven metal has been receiving constant flows in the days ahead of President Donald Trump’s announcement of reciprocal tariffs.

Trading well above the $3000 per ounce handle at $3150 after gaining 1.2% on Monday, gold soared nearly 20% in Q1, the largest gain on record. However, some analysts remain cautious about whether the rally will continue as reciprocal tariffs coming into effect on 2 April, Wednesday, could trigger some profit-taking.

Despite the short-term risk, ongoing geopolitical tensions, central bank demand, and expectations that the Fed will eventually lower its interest rates, gold investors consider all of these factors.

Tariffs, Fear and Uncertainty Boost Gold

The yellow metal saw an increase of over 10% in March, driven by fear surrounding a new set of reciprocal tariffs Trump has vowed to implement on 2 April. The “fear premium” appears to have redirected investors from stocks to the safe haven gold, taking on a more prominent hedging role as uncertainty weighs on the US dollar (DX). Trump’s protectionist policies and the real threat of reigniting inflation have roiled markets, with “Liberation Day” fast approaching and confidence in the US economy languishing.

What has been dubbed “Liberation Day” for the US in recent weeks has swung from “far more generous” tariff breaks initially to including all nations just last Sunday. On the one hand, some estimates show that the US could raise as much as $600 billion every single year from tariffs. On the other hand, investors are becoming increasingly convinced that tariffs will slow down economic activity in the US and force the Fed to cut rates sooner than expected - one of the reasons US yields, and in turn, the dollar, remain under pressure. However, tariff threats and the announcement of global levies on autos, which take effect on 3 April, have increased fears of a trade war on a global scale.

Reciprocal Tariffs Could Impact Gold Prices

White House press secretary Karoline Leavitt said just this Monday that Trump will announce his plans during his Rose Garden conference. She provided no details about what would be announced but indicated the president might announce tariffs that match other countries’ reciprocal actions. Recently, new tariffs on lumber, pharmaceuticals, microchips, and copper have been proposed, with essentially anything expected, from delayed tariffs on Canada and Mexico to tariffs on all partners. 

What will be said and how it will be announced will provide clues about where gold could be heading next. The EU, for example, has already responded to the metal duties with a $28 billion counter-tariff on US goods, Canada with a $20 billion levy, and China with 15% levies on farm goods.  If this trend continues, some analysts say that the upside in gold prices could continue. Most economists, in fact, expect higher tariffs to continue hurting discretionary spending more, as well as increasing price pressures.

Besides these factors, investors have been led in recent months to seek a safe haven due to the sporadic changes about what to expect around tariffs - i.e. uncertainty. Although economic data in the US has remained generally strong, uncertainty is expected to weaken growth and consumer spending. Goldman Sachs (GS) said tariffs and the expected economic situation in the US have led them to lower the S&P 500 (ES) target to 5700 from 6200 before. (Source: Yahoo Finance)

Many Catalysts for Gold’s Future

Tariffs have undoubtedly weighed on stocks as markets responded to economic uncertainty, with gold forecasts also seeing upward revisions. Bank of America (BAC) raised its price target last week to $3500 per ounce, pointing to demand from central banks, retail investors, and Chinese insurers, who were granted in February permission to invest in gold for the first time. Gold has been supported by geopolitical tensions and worries around inflation. 

In recent remarks, Fed’s Barkin said that higher inflation from tariffs is less likely to push the Fed to cut rates. However, he also noted that passing those costs to consumers might weigh on the labour market. Goldman Sachs also raised concerns over unemployment, increasing its forecast to 4.5% and cutting its GDP outlook to 1%. The bank also increased its inflation target for 2025 to 3.5% from 3%, well above the Fed’s target of 2%, putting the odds of a recession in the next year at 35% from 20%. The Wall Street firm said there is a growing probability of stagflation, though Fed’s Williams noted yesterday, Monday, that “the economy does not have stagflation right now.”

Conclusion

Gold continued to record new highs as market participants became increasingly anxious ahead of “Liberation Day,” seeking refuge in the safe haven.  

While short-term risks from profit-taking and potentially softer tariff announcements loom large, the broader backdrop of geopolitical tensions, inflationary pressures, and central bank demand continues to provide strong support for gold.

Analysts remain optimistic yet cautious, watching upcoming tariff policies and economic data for further cues on gold’s potential direction. However, gold is volatile, and no event can guarantee the continuation of its recent performance. 

*Past performance does not reflect future results.