Gold prices surge as Middle East tensions escalate

Gold prices reached new heights on Tuesday morning, driven by a resurgence of violence in the Middle East. Tariffs imposed by Washington, along with retaliatory measures from affected countries, have dampened investor enthusiasm, prompting a shift towards safe-haven assets.

Shortly after 9:20 AM, gold prices climbed by 0.7% to $3,021.84 per ounce, comfortably surpassing the $3,000 mark. Over the past month, the price of the yellow metal has risen by 2.9%, and it has soared nearly 40% year-on-year.

Analysts from Trading Economics warned that tariffs enacted by President Donald Trump and the retaliatory actions from affected nations have heightened fears of a looming trade confrontation.

Last Wednesday, the European Union announced tariffs on several American products, including bourbon, motorcycles, and boats, in response to the 25% tariffs on steel and aluminum that took effect the same day. In turn, Trump indicated his willingness to raise tariffs on European spirits to 200% if Brussels did not abandon its plan to impose a 50% tax on bourbon.

Compounding these trade tensions are renewed airstrikes in Gaza by the Israeli military, raising concerns about a swift collapse of the ceasefire with Hamas. Experts at Trading Economics noted that attacks on U.S. warships in the Red Sea by Houthi rebels have further exacerbated fears of escalating violence in the region.

On Tuesday, Israel pledged to continue its offensive in Gaza until all hostages are returned, having conducted its most intense strikes since the ceasefire began in January, resulting in at least 330 fatalities according to the Hamas Health Ministry.

Monetary policy is also affecting investor sentiment as they await announcements from the U.S. Federal Reserve (Fed) on Wednesday. While most participants expect interest rates to remain unchanged, they will focus on the economic projections and future monetary policy direction from the central bank, according to Trading Economics.