Gold smashes ₹85,000 mark as US-China tensions and trade wars send prices soaring; will it rise further?

Gold prices hit an all-time high on Wednesday, February 5, amid global uncertainties and strong investor demand. In India, gold breached the ₹85,000 per 10 grams. Gold prices on the MCX Wednesday hovered at an intraday low of ₹84,018 per 10 grams. In the international market, prices are hovering around $2,858 per ounce.

Manav Modi, Analyst, Commodity Research, MOFSL, said, "Gold prices touched an all-time high in yesterday’s session, underpinned by safe-haven demand after China responded to U.S. tariffs, which were initially imposed by President Donald Trump on the world's largest consumer of gold. China swiftly hit back with tariffs on U.S. imports, intensifying the trade war between the world's two largest economies, even as Trump granted temporary reprieves to Mexico and Canada."

Trump said on Tuesday he sees no urgency in speaking with Chinese President Xi Jinping to ease a growing trade war, sparked by his sweeping 10% tariffs on all Chinese imports. The market views the tariffs as inflationary, potentially boosting safe-haven demand for bullion, which is traditionally seen as a hedge against both rising prices and geopolitical turmoil. President Trump also commented that US would take over and develop Gaza strip increasing uncertainties in market.

Data showed U.S. job openings in December fell to 7.6 million, falling short of the consensus estimate of 8 million, indicating a potential economic slowdown. The dollar index fell sharply from the recent high of ~109.80 to currently at ~107.90 further supporting the precious metal pack. "Focus today will be on U.S. private payroll data and services PMI from major economies," said Modi.

Will gold prices rise further?

Gold prices surged past ₹85,000 due to global economic uncertainties, inflation concerns, and a weaker rupee. Central bank purchases, geopolitical tensions, and strong investor demand as a safe-haven asset further fuel the rally. Additionally, interest rate expectations and market volatility drive gold’s appeal as a stable investment.

Kaynat Chainwala, AVP-Commodity Research, Kotak Securities, says, "Gold prices have reached an all-time high and may continue to rise, driven by safe-haven demand amid fears of US-China trade war, Trump’s plans to impose additional tariffs on other targets, including the EU, and his intentions regarding control of Gaza. However, a strong US labour report could prompt the Fed to maintain its “higher for longer” stance on rates, potentially triggering a brief pullback."