Gold Shines as US-China Trade Talks Fail to Ease Global Uncertainty

NEW YORK, June 6, 2025 - Gold prices soared to a three-month high of $2750 per ounce on Friday, as stalled US-China trade negotiations deepened global economic uncertainty, driving investors to the safe-haven asset. The breakdown of talks, marked by renewed tariff threats and disputes over technology transfers, has heightened fears of a prolonged trade war, compounding concerns over slowing global growth.

With inflation pressures lingering and central banks signaling tighter monetary policies, gold's appeal as a hedge against volatility has surged, pushing its year-to-date gains to 18%, outpacing most major asset classes.

Trade Talks Collapse Sparks Market Jitters

The latest round of US-China trade discussions, held in Beijing this week, ended without progress, with both sides accusing each other of intransigence. US Trade Representative Katherine Tai criticized China's subsidies for electric vehicle and semiconductor industries, while China's Commerce Ministry condemned proposed US tariffs of up to 25% on $200 billion in Chinese goods. The impasse, coupled with China's retaliatory restrictions on rare earth exports, has rattled markets, with the S&P 500 dropping 2.1% and Asian indices like the Hang Seng falling 3.4% this week.

Investors, wary of escalating tensions, have poured $1.2 billion into gold-backed ETFs in the past month, according to the World Gold Council, reflecting a flight to safety.

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Economic Headwinds Bolster Gold's Appeal

Global economic indicators paint a grim picture, further fueling gold's rally. The International Monetary Fund revised its 2025 global growth forecast downward to 2.9% on June 4, citing trade disruptions and supply chain bottlenecks. In the US, inflation remains stubborn at 3.8%, above the Federal Reserve's 2% target, prompting speculation of sustained high interest rates.

Meanwhile, China's manufacturing PMI contracted to 48.7 in May, signaling a slowdown in the world's second-largest economy. Against this backdrop, gold's role as a non-yielding asset immune to currency devaluation has drawn institutional and retail investors, with demand for physical gold bars up 15% year-over-year, per industry data.

Did You Know?
In 1980, gold prices surged to a then-record $850 per ounce (equivalent to $3000 today) during the Soviet-Afghan War and US-Iran hostage crisis, driven by similar safe-haven demand.

Geopolitical Tensions Add Fuel

Beyond trade woes, geopolitical risks are amplifying gold's allure. Ongoing conflicts in Ukraine and the Middle East, coupled with China's increased military activity near Taiwan, have heightened global instability. The US dollar, typically a safe-haven rival to gold, weakened 1.5% against a basket of currencies this week, making gold more attractive for international investors.

Central banks, particularly in India and Turkey, have boosted gold reserves by 120 metric tons in 2025, signaling distrust in fiat currencies. Analysts at Goldman Sachs predict gold could hit $3000 by mid-2026 if geopolitical and trade tensions persist.