Gold hits record high as market reacts to US-China trade tensions

Gold prices have hit a new all-time high of over $2,877 an ounce. Investors are buying up the precious metal as trade tensions between the United States and China escalate, creating a shortage of physical gold in financial centers such as London.

According to Bloomberg, the main trigger for the price increase was concerns about the potential return of tough US tariffs. Donald Trump, if re-elected, plans to impose a 60% tariff on Chinese imports, which could trigger a new round of inflation and force the Federal Reserve to reconsider its monetary policy.

Against this background, large traders have begun to transport bullion to the United States in large quantities, which has caused a shortage of gold in London, its traditional storage center. Demand for the physical metal has grown so much that investors are having to wait up to a week to remove bullion from the Bank of England to private storage.

The increased demand has also caused a sharp increase in the London Lombardy Off-Float (GOFO) rate, which reflects the cost of short-term loans secured by gold. It has risen from zero to 4.7%, indicating a significant shortage of the metal in the market.

Experts predict that in the event of further tension, central banks may begin to sell part of their reserves or lend gold. Rona O’Connell, head of market analysis at StoneX Group, notes that governments may intervene to avoid chaos in the precious metals market.

The price increase has affected not only gold - silver, platinum and palladium are also becoming more expensive. An additional factor was the weakening of the dollar after the publication of a weak employment report in the US, which indicates a gradual cooling of the labor market. Economists do not rule out further volatility, and if the trade conflict between the US and China escalates, gold could surpass $3,000 per ounce in the coming months.