The value of gold has been pushed to an historic high as confidence in the US economy continues to collapse.
The price of the precious metal has increased by 25% since the start of the year to more than $3,300 per ounce as growing pessimism surrounding the world’s largest economy shows little sign of abating.
This comes after President Trump stepped up his trade war with China in early April by increasing the tax on Chinese imports to 125%. This has resulted in retaliatory tariffs of 84%.
One major casualty of this policy is Nvidia. Billions of dollars were wiped off the value of the US artificial intelligence tech giant when additional restrictions were placed on the sale of their chips to China.
But now Jerome Powell, chair of the Federal Reserve, has warned that we are unlikely to see lower inflation this year, blaming the tariffs the president has implemented.
Nowhere is investor pessimism more prevalent than in US government debt, which is typically seen as a safe haven asset investors turn to when confidence is low. But the trade war and concerns of its impact on the US economy has tainted this sovereign bond market.
Indeed, investors have turned cold on the assets class with yields on 30-year US government debt jumping to 4.5% from 3.9% in the days after the tariffs were confirmed. At the time of writing, they sit at around 4.7%.
Yet there could be further pain to come. Goldman Sachs has predicted that the gold price could reach $3,700 this year after its previous $3,300 forecast has already been surpassed.
Meanwhile, asset management giant Blackrock now believes there will be no growth in the US economy this year and predicts that inflation will rise to 3.8%. It currently sits at around 2.4%.
This story still has some distance to run.
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