There have been record highs in gold prices in recent months, and the most viable explanation for this is the emerging trade tensions between the US and China. President Donald Trump has been imposing tariffs, henc
e deepening trade war indication, and causing greater uncertainty in the global markets, making the acceptance of this phenomenon, its effects, and their consequences quite timely.
Initial tariffs imposed by the Trump administration created a wave of trade tension worldwide. The U.S. government announced a fresh series of duties on a long list of products imported from China that were expected to shield the domestic industries within the U.S. However, this escalation affected not only the United States but also the global economy.
China was probably not going to take this sitting down, so it raised tariffs on imports from the United States in retaliation where it was called to challenge the trade grievances of China. This further heightened the trade tensions. Consequently, this war of trade started to adversely affect trade, leaving investors skittish, thus driving them toward safe havens like gold.
The reason gold is an asset times of economic distress is that any period of unease will send investors flocking to gold. One of the factors driving gold prices is its purchase for wealth conservation. As the war trade tensions heightened, so did demand for gold, hence the setting of all-time high prices for the yellow metal.
Also, several other factors are more or less affecting the economic climate internationally due to this tension in trade. While the trade relationship between the US and China is deteriorating, they are on account affected with America’s trade relationships with a number of other countries. All these factors are wrapping together in this huge economic basket, which is creating an uncertain and unstable situation.
The experts believe that should this trade war persist in the same manner, we may witness a global recession. In it, not only will the trade relations with the US and China be affected but also with other countries. Industries would suffer losses, and there is the prospect of increasing unemployment too.
As gold prices rise, they sparkle challengingly in the eyes of investors looking for an opportunity, on the very contrary worrying those looking to purchase retail gold. At the moment, it hurts buying gold for common people because it has become expensive.
In the near future, depreciation of the rupee and rising inflation may also affect the price of gold. The rise in price for gold under these conditions would be more difficult for the already strained economic conditions.
If the present situation continues for a sustained period, we might witness difficult economic conditions in the future. With such development, the future reconciliation of our economic stability might be gravely challenged, thus urging everyone to keep awake and alarmed.