Gold Soars to New Heights Amid Trade War Drama and Powell’s Caution
Tuesday, May 20th 2025
As financial markets are rocked by trade war developments and cautious messaging from the Federal Reserve, gold has once again proven its mettle. The precious metal surged to a fresh record on Thursday, continuing a stellar run fueled by growing investor anxiety and a weakening dollar.
Market Jitters Drive Flight to Safety
Gold reached as high as $3,357.78 per ounce before giving back some gains later in the session. This came after a 3.5% leap on Wednesday — its strongest single-day rally since March 2023 — as the dollar slipped to a six-month low and equities took a dive.
A flurry of headlines related to shifting tariff policies and global trade tensions left investors disoriented. Federal Reserve Chair Jerome Powell added to the unease by signaling the central bank was in no rush to intervene or adjust interest rates in response to market volatility.
“We don’t know that yet, and until we know that we can’t make informed decisions,” Powell said at the Economic Club of Chicago when pressed about potential Fed action.
His remarks underscored the unpredictability of the current economic landscape and dashed investor hopes for immediate relief from the Fed.
Trade Negotiations Bring Uncertainty, Not Clarity
In parallel to market reactions, diplomatic efforts continue. The U.S. and Japan began formal trade talks aimed at preventing further tariffs, though no immediate resolution emerged. Japan’s lead negotiator signaled optimism about reaching a deal within the 90-day grace period, while President Trump described the discussions as “big progress.”
Still, the trade landscape remains murky. The Trump administration is intensifying pressure on other nations to limit their trade with China, further escalating global tensions. Meanwhile, China’s President Xi Jinping, on a diplomatic tour of Southeast Asia, urged nations to resist “hegemony” and power politics — a not-so-subtle pushback against U.S. influence.
Gold Shines Brighter in Uncertain Times
So far in 2025, gold has climbed nearly 28%, already topping its impressive 27% return from 2024. The precious metal continues to outperform as fears of a global economic slowdown mount and investors increasingly look to shield themselves from volatility.
“The big theme is uncertainty,” said Nicholas Frappell, Global Head of Institutional Markets at ABC Refinery in Sydney. “Uncertainty about the scale and breadth of tariffs, uncertainty over the strategic plan of the U.S. administration, and the degree to which America’s trade partners will respond.”
At last check in Singapore, gold was trading slightly lower at $3,338.45 an ounce, but still on pace for a solid weekly gain of around 3%. In contrast, the Bloomberg Dollar Spot Index rebounded 0.2% after its drop on Wednesday. Other precious metals, including silver, platinum, and palladium, also edged lower.
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