Gold prices have continued to hit fresh record highs in both Thai and world markets, with global prices approaching US$3,000 an ounce driven by escalating trade tensions and a potential inflation spike.
Bullion climbed to $2,937 an ounce amid volatile trade on Monday in Western markets after US President Donald Trump signed executive orders to impose 25% tariffs on steel and aluminium imports from March 12, ramping up a long-promised trade war despite warnings from Europe and China.
Spot gold hit a peak of $2,942.70 on Tuesday in Asian trading before easing to $2,909.49 in late afternoon.
Domestic prices soared to a new high of 47,450 baht per baht-weight (15.2 grammes) early Tuesday, partly due to a weakening baht as the dollar soared. By late afternoon the selling price had eased back to 46,850 baht, according to the Thai Gold Traders Association.
The precious metal has surged 11% this year, setting successive records. Investors have flocked to gold as a safe-haven asset amid growing concerns over Trump’s latest tariff measures, which could escalate trade wars and fuel inflation.
Canada and Mexico are the biggest steel exporters to the US, according to US trade data. Brazil and South Korea are also major steel providers. Trump also signalled he would look at imposing additional tariffs on automobiles, pharmaceuticals and computer chips.
The Bangkok-based gold trader Hua Seng Heng said another factor driving domestic gold prices is the baht, which depreciated to 34.07 per dollar on Tuesday, making gold more expensive in local currency terms.
Domestic gold prices have risen by 4,200 baht for the year to date, increasing 2,050 baht in January and another 2,150 baht in the first 10 days of February. In 2024, the asset peaked at 42,400 baht per baht-weight.
Traders will also focus on Federal Reserve chairman Jerome Powell’s semi-annual testimony to US lawmakers on Tuesday and Wednesday for clues about future US monetary policy and interest rates.
Mr Powell is likely to highlight the resilient economy as a reason central bankers are in no rush to cut borrowing costs further, which could be bearish for bullion because it pays no interest, noted Hua Seng Heng.
Banks forecast a test of $3,000 an ounce is coming. Citigroup said last week it expected gold to hit that level within three months, with geopolitical tensions and trade wars lifting demand. JP Morgan Private Bank set a year-end target at $3,150.
Gold also received support from China’s pilot programme that allows 10 major insurers to buy gold for the first time, up to 1% of their assets. Analysts said this could translate to potentially 200 billion yuan ($27.4 billion) of funds spent on gold.
The policy tweak makes gold the first commodity Chinese insurers are explicitly permitted for investment.
China had restricted insurance funds from taking positions in assets without “stable cash returns”, and it limits the amount they can put into bonds and stocks.
Louise Street, senior markets analyst at the World Gold Council (WGC), said central banks are expected to remain in the driver’s seat for gold demand this year, with gold exchange-traded fund investors “joining the fray, especially if we see lower, albeit volatile interest rates”.
Last year was particularly strong for Thailand’s gold bar and coin investment demand, as the country ranked seventh globally, according to the WGC.