Gold prices have hit a historic high, surpassing $2,800 per ounce, as markets react to President Donald Trump’s sweeping tariffs on Canada, Mexico, and China. The surge signals a strong shift toward safe-haven assets, driven by rising fears of trade wars and inflation. With uncertainty mounting, investors are flocking to gold, raising questions about the future of the precious metal in these turbulent times.
Gold market reacts
On February 1, the White House revealed that President Trump had decided to impose a 25% tariff on imports from Mexico and Canada, and a 10% tariff on goods from China. Energy resources from Canada would also be subject to a 10% tariff. However, Trump agreed to delay the U.S. tariffs originally scheduled to begin on Tuesday, granting Mexico and Canada an additional 30 days.
According to Goldprice.org, gold prices have surged by 80.95% over the past five years and 580.05% over the last two decades. Since October 2023, gold prices soared over 50%.
An article by Axel Rudolph, published on January 31 by the UK-based online trading platform IG Group, highlights that central banks globally have been increasing their gold reserves to diversify assets and reduce dependence on the U.S. dollar. A key example cited is China, which has been buying over 1,000 tons of gold annually in recent years.
Hussam Elagamy, Head of Market Research at Gold Bullion, told Business Monthly that the primary factor behind the surge in gold prices was President Trump’s decision on customs tariffs, which is expected to trigger inflationary pressures in the US. This, in turn, could prompt the Federal Reserve to maintain higher interest rates for a prolonged period.
Fixed income markets expect the US Federal Reserve to cut interest rates slightly in 2025, with short-term rates forecast to end the year around 4%, down from the current 4.25% to 4.5% range, according to Forbes US. This follows a rate cut in December 2024. The forecast assumes steady economic growth, unemployment just above 4%, and inflation near 2.5% by year-end. However, any deviation in economic performance could alter the interest rate outlook.
Elagamy explained, “Trump’s expansion of customs tariffs and his statements have shifted the situation, making gold an increasingly attractive safe haven.”
He pointed out that gold stored in London’s vaults has recently been moved to the New York Stock Exchange (NYSE) at an unusually fast pace. “This indicates that investors are eager to keep their gold close, especially in the U.S., in case of any potential emergencies,” he explained.
He also noted that banks in London, for gold exchange purposes, have started borrowing from the Bank of England. This borrowing has led to a shortage of gold available for trading in futures contracts, contributing to a sharp rise in prices.
“Currently, there is significant market uncertainty, prompting investors to flock to gold as a safe haven,” he added.
“We can’t say that the rise in gold prices will stop here,” Elagamy stated. He noted that any decrease following the initial surge is merely a temporary correction, with the overall trend for gold remaining upward.
Elagamy also emphasized that Trump’s tariffs on trade partners will continue to have lasting effects, likely pushing gold prices even higher. “After Trump’s decisions, we may see gold hit $3,000 per ounce sooner than expected,” he added.
Similarly, Citi analysts predicted that gold could reach $3,000 per ounce within the next 12 months.
Local impact
As of February 5, gold prices in Egypt were recorded as follows: EGP 4,571.5 for 24K, EGP 4000 for 21K, and EGP 3,428.5 for 18K, according to the iSagha platform.
In Egypt, two exchange rates are used for gold: the “Goldsmiths dollar” (Al Shagha dollar) and the official market dollar. Elagamy explained that the Goldsmiths dollar is currently priced EGP 1 lower than the official market dollar. This difference is driven by factors such as reduced local demand for gold and the shift of gold traders and companies toward exporting gold.
As a result, traders are buying gold at a lower price from the market, allowing them to export it at a higher price and secure a profitable margin, particularly due to weak local demand. However, Elagamy emphasized that this is a temporary situation.
“What we’ve noticed lately is that the movement of gold is not as volatile as before; there is more stability,” he added.
Elagamy pointed out that the sharp surges in gold prices observed at the start of 2024 have eased. He also noted that as long as the dollar exchange rate remains stable in banks, gold prices will stabilize and primarily be influenced by international gold prices.
As the global economy continues to face uncertainty, gold is expected to remain a vital asset for investors seeking to safeguard their wealth from market volatility.