Gold rose to a record high while stocks in Asia slumped, driven by concerns about reciprocal tariffs and a widening global trade war after US President Donald Trump announced levies on all imports of cars and car parts.
The precious metal was trading at $3,080.76 an ounce at 10.00am UAE time on Friday. It was on track for a fourth weekly gain, with prices supported by growing haven demand.
Asian stocks fell on Friday with heavy selling in South Korea and Japan. The widening of the global trade war has jolted markets, with shares of global car makers hit particularly hard.
In Asia, Japan's Nikkei fell more than 2 per cent, led by sharp drop in Toyota and Honda. South Korea's benchmark index touched a two-week low and was last down 1.3 per cent. The car industry is a pillar of both countries' economies.
Hong Kong’s Hang Seng index was 0.6 per cent higher, shrugging off the car tariff threat.
“Safe haven gold has just hit a new record high as trade war uncertainty creates volatility in stock markets,” said Fawad Razaqzada, market analyst at City Index and Forex.com. "The trade war has escalated and there is going to be a lot of back and forth from now until the April 2 ‘liberation day’."
Mr Trump used that term when announcing plans for reciprocal tariffs on April 2. He escalated his trade war this week by slapping a 25 per cent tariff on all cars not made in the US.
The US, the world's largest steel and aluminium importer, this month also introduced 25 per cent tariffs on all imports of the metals, which are used in construction, the car industry, energy and manufacturing. The move aims to stimulate domestic processing.
Mr Trump has also planned a 10 per cent tariff on Canadian energy products that fall outside the US-Mexico-Canada Agreement he negotiated during his first term.
The President has also announced 25 per cent tariffs on imports from Canada and Mexico to force the two countries to increase their fight against fentanyl trafficking and illegal migration. He said he would add another 10 per cent tariff on goods from China, on top of the 10 per cent he put in place in February.
Canada announced plans to place tariffs on $22 billion worth of US goods in retaliation. China and the EU have also implemented retaliatory tariffs, while levies on most imports from Mexico have been delayed.
Global stocks markets have faced greater volatility since Mr Trump followed through with his campaign promise to levy duties on some of the US’s biggest trade partners.
Mr Trump's tariff strategy has sparked concerns that prices could rise again and economic growth could be hampered. Goldman Sachs lowered its 2025 gross domestic product forecast for the US to 1.7 per cent from 2.4 per cent, citing tariff uncertainty.
Some analysts are increasing the probabilities of a US recession this year. One JP Morgan analysis increased recession odds from 30 to 40 per cent, The Wall Street Journal reported, while CNBC reported Pimco's managing director of Asia Pacific, Alec Kersman, raised his probability to about 35 per cent.
Rising worries about the potential effect of an escalating trade war overshadowed data showing the US economy expanded at a quicker pace in the fourth quarter than previously estimated. A measure of inflation was revised lower.
Gold is up about 16 per cent this year. The rally has been supported by central bank buying and investor demand for haven assets amid rising geopolitical uncertainties.
Several major banks have raised their price targets for the precious metal, with Goldman Sachs this week ramping up its forecast to $3,300 an ounce by year-end. The bank cited higher-than-expected central bank demand and strong inflows into bullion-backed exchange traded funds.
“Gold remains the most reliable hedge against the Trump tariffs,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Echoing the sentiment, Samer Hasn, senior market analyst at multi-asset broker XS.com, said gold's gains came as sentiment towards the US economy continues to deteriorate, fuelled by growing concerns over the impact of Mr Trump's policies, “which are deepening pessimism among consumers and businesses alike”.
“The negative outlook surrounding the Chinese economy's ability to recover amid weak domestic demand and the threat to exports is also fuelling demand for gold as a safe haven throughout the year,” he added.
