Gold prices ticked higher on Wednesday morning amid concerns about US tariffs and global economic growth.
Gold futures (GC=F) were up 0.3% at $3,388 per ounce at the time of writing, while the spot gold price rose 0.2% to $3,361.05 per ounce.
In the latest developments on US tariffs, president Donald Trump signed an order on Tuesday to increase duties on steel and aluminium to 50%, which came into effect overnight. However, the UK was temporarily spared from this doubling of tariffs.
Trump then said in a post on Truth Social in the early hours of Wednesday that it was “extremely hard” to reach a deal with China's president Xi Jinping.
The comments come after China responded to Trump's accusation on Friday that it had “totally violated its agreement” with the US, in turn accusing the US of breaching the agreement and vowing to protect its interests.
Concerns about the economic impact of Trump's tariffs were compounded by the Organisation of Economic Cooperation and Development (OECD) cutting its global growth forecasts on Tuesday.
The OECD warned that the economic outlook was becoming “increasingly challenging” and predicted that that global gross domestic product (GDP) growth will slow from 3.3% in 2024 to 2.9% this year and in 2026.
Read more: FTSE 100 LIVE: London flat, Europe gains as UK to be spared 50% steel and aluminium tariffs
Investors have been turning to gold, as the precious metal is considered to act as a hedge in times of economic and political uncertainty.
ING head of commodities strategy Warren Patterson and commodities strategist Ewa Manthey pointed out that gold prices were up around 27% so far this year.
“The rise is being driven by the global trade war, geopolitical risks, and central banks adding to their reserves. In the first quarter, central banks bought 244 tonnes of gold,” they said.
However, they cited latest data from the World Gold Council, which showed central banks added a net 12 tonnes of gold to global gold reserves in April, 12% lower than the previous month and a long way below the 12-month average of 28 tonnes.
“Although central banks are still buying gold, the pace has slowed as prices hit record highs,” they said. “April marked the second consecutive month of slower accumulation.
“Despite the slowdown in purchases, central banks are likely to continue to add gold to their reserves, given the uncertain economic environment and the efforts to diversify away from the US dollar.”
The pound edged higher against the dollar (GBPUSD=X), rising 0.1% to $1.3532 at the time of writing, as investors looked ahead to trade talks on Wednesday.
