The news that the tariff war between the US and China is heating up again has not gone away. Stocks are falling, currency exchange rates are plummeting, and the global economy is again filled with uncertainty. But in the midst of all that, there is one anomaly: the price of gold is actually rising rapidly.
This phenomenon always attracts attention and raises the question, why when many assets are falling, gold shines brighter? Tensions between the United States and China are heating up again due to the tariff war, making many investors and global market players look for safe assets to protect their wealth.
This has seen gold prices rise sharply in recent weeks, following the lead of global economic uncertainty. This phenomenon is not new. Whenever there is geopolitical tension or economic instability, gold is always the first choice of investors.
But why have tariff wars been driving gold’s price movements upwards lately? Why would a tariff war be the trigger? Well, all the answers are in this article! Let’s take a look at the full explanation below so that you can dive deeper into the reasons why gold prices rise every time a trade war erupts.
1. Gold Prices Rise as a Safe Haven as Uncertainty Rises
As the trade conflict between the world’s two largest economies heats up, many market participants lose confidence in riskier assets such as stocks. This is when gold shines as a safe haven. Gold prices rise as many investors turn to assets that are considered more stable and safe from economic shocks.
Gold is not affected by inflation, interest rates, or government policies like currencies or sovereign debt. This makes it highly desirable in times of uncertainty. As you may have noticed, when market sentiment turns negative, the precious metal often performs opposite to the stock market.
In addition, the uncertainty of trade policy between the US and China has caused the US dollar exchange rate to fluctuate. These fluctuations have also boosted interest in gold, causing gold prices to rise as global investors prefer to store their wealth in physical or digital gold.
Not only institutional investors, even central banks in various countries are increasing their gold reserves as a form of value protection. The more demand, the greater the impetus that makes gold prices rise in the short and long term.
Also Read: Why does the Gold Price Keep Rising? Recognize 5 Driving Factors – Treasury
2. Exchange Rate Impacts and Global Market Volatility Make Gold Prices Rise
As the tariff war heats up, currency exchange rates become highly vulnerable to speculation and monetary policy intervention. When the US dollar weakens due to political and economic tensions, gold prices automatically rise, as gold prices are usually calculated in US dollars.
The weakening of the US dollar makes gold cheaper for overseas buyers, thus increasing global demand for gold. As you can imagine, when global demand increases amidst a relatively stable supply, it is natural for gold prices to rise sharply in the international market.
Not only that, the increasing volatility of the stock market has also encouraged investors to shift their funds to safer assets. Gold has become a top choice due to its stability amid market turmoil. Under these conditions, the upward gold price trend often continues until the economic situation calms down again.
3. Global Investors’ Diversification Strategy Also Drives Gold Price Up
In the face of global risks such as tariff wars, large investors do not rely on just one type of asset. They implement a diversification strategy, and gold has always been an important component of that strategy. No wonder, then, that when trade war tensions escalate, gold prices rise due to a surge in demand from investors.
You need to know that many large investors have a policy of increasing their gold portion when economic risks increase. This additional allocation to gold drives a significant increase in demand, which in turn pushes the price of gold up consistently.
Not only from the side of large investors, retail investors also take part in this trend. Easier access to gold investments, both physical and digital, has led more people to look at gold as a portfolio protector. This broadens the demand base and reinforces the upward trend of gold prices.
Even in developing countries, including Indonesia, interest in gold is increasing as a form of long-term investment. This shows that the upward gold price trend is not only happening in the global market, but is also felt in the domestic market, as public awareness of the importance of protecting asset value increases.
is heating up again. A combination of economic uncertainty, exchange rate fluctuations, market volatility, as well as diversification strategies of global investors are the main reasons behind gold prices continuing to rise.
For friends who are considering investing in gold, understanding the global context such as trade wars can be a good guide in making decisions. Because as we have seen, gold prices rise not solely due to speculation, but because there are underlying fundamental forces.
So, in the face of global economic uncertainty, gold remains a wise choice. Now is the right time for you to start or increase your gold investment before it’s too late!
