Gold price surge as Tariff Turmoil Sparks a 2%.

Gold is once again showing its strength as the world’s favorite “safe-haven” asset. On Wednesday, XAU prices jumped more than 2%, climbing from just under $3,000 to near $3,045 per ounce. The surge came shortly after the United States officially implemented new tariffs, reigniting fears of a global economic slowdown.

Earlier in the week, there was hope that US President Donald Trump might soften the blow by delaying tariffs for most countries. Some media reports suggested a possible 90-day pause, giving businesses more breathing room. But those hopes were quickly dashed. The White House confirmed there would be no pause, calling those media reports “fake news.” This confirmation set off alarm bells in global markets.

With tariffs now active, investors are growing concerned about the ripple effects on global trade and the economy—and gold is benefiting from that fear.

Risk-Off Mode Sends Investors Scrambling for Safe-Havens

Gold doesn’t earn interest, pay dividends, or generate income. So why does it spike during economic turmoil? The answer is simple: gold is trusted. It’s a store of value—a timeless form of wealth that has historically performed well in periods of uncertainty.

Right now, several factors are creating a perfect environment for gold to rally:

Fresh US tariffs have triggered a new wave of trade war fears.

Global economic stability is under threat, especially as supply chains get disrupted.

Investors expect central banks, especially the US Federal Reserve, to cut interest rates—which makes gold more attractive.

When rates go down, the return on savings accounts and government bonds also falls. Since XAU doesn’t pay interest, the opportunity cost of holding it drops, increasing demand.

As Christopher Wong, a currency strategist at OCBC Bank, puts it: “Gold’s rebound reflects growing investor anxiety over tariff threats and the potential reshaping of global trade norms.”

Fed Rate Cuts Could Fuel More Gold Gains

Another big driver behind gold’s rise is the growing belief that the US Federal Reserve (Fed) will step in to support the economy by cutting interest rates.

The CME FedWatch Tool, which tracks market expectations, shows:

A 53.5% chance the Fed will cut rates in its May meeting, up from just 10.6% last week.

A 100% probability of a rate cut in June, with over 55% of traders expecting a full 50 basis point (0.50%) cut.

That’s a dramatic swing in sentiment in just one week. Markets now clearly believe the Fed will act quickly to avoid a potential recession caused by trade disruptions, weakening global demand, and falling consumer confidence.

Lower interest rates usually boost gold prices, as they make traditional investments (like bonds) less attractive compared to holding physical gold or gold-backed securities.

Chinese Investors Turn to Gold as Trade War Fears Mount

Chinese investors are also pouring money into gold at a record pace. As trade tensions with the US escalate, XAU backed Exchange Traded Funds (ETFs) in China are seeing unprecedented inflows.

According to Bloomberg:

Investors pumped over 7.6 billion yuan (around $1 billion) into just four major Chinese gold ETFs last week.

This is the highest weekly inflow on record for the country.

Demand continues to rise this week, signaling growing panic over the trade war’s potential impact.

These ETFs allow investors to gain exposure to gold without physically holding it, making them a popular option during uncertain times. It’s a clear sign that Chinese investors are bracing for more volatility—and possibly more tariffs.

Regulatory Jitters Knock Down Muthoot Finance Shares

The gold rally isn’t just a story of rising prices—it’s also affecting companies that deal with gold-related services.

Muthoot Finance, India’s largest non-banking XAU loan provider, saw its shares drop as much as 6.3% this week. The Reserve Bank of India (RBI) announced that it would review gold loan regulations, possibly making changes that could open the sector to more competition.

This news spooked investors, despite the rising gold price, because tighter rules or increased competition could hurt profit margins for existing gold loan companies. So, while the price of gold is climbing, not every XAU-related business is benefiting.

What’s Next for Gold Prices?

Looking ahead, XAU direction will likely depend on a few key factors:

US economic data, especially inflation figures, consumer spending, and employment reports.

Central bank decisions, particularly from the Federal Reserve and Bank of England.

Any new developments in the US-China trade war—positive news could cap gold’s rise, while negative headlines may push it even higher.

If the Fed cuts interest rates and trade tensions remain high, analysts believe gold could push above $3,100 in the near term. On the other hand, if markets calm down, a short-term correction might be on the cards.