Gold jumps 3% as trade risks mount, Fed meeting eyed

Gold bars

Gold prices climbed 3% on Tuesday as escalating trade tensions and investor caution ahead of this week’s Federal Reserve meeting fueled demand for safe-haven assets.

June gold futures settled 3% higher at $3,422.80 an ounce.

The rally came after US President Donald Trump on Monday said he plans to impose tariffs on pharmaceutical imports within two weeks, following his recent move to target foreign films with a 100% import duty over the weekend.

Separately, Bloomberg reported that the European Union is preparing to slap tariffs on roughly €100 billion ($113.26 billion) worth of US goods if ongoing trade talks between the two sides fail.

The renewed trade tensions spurred a flight to safety, driving investors toward gold and other defensive assets.

"The bull market is being driven by China's latest gold investing surge, plus the ongoing bid from central banks wanting to cut their exposure to US assets, most especially the dollar," said Adrian Ash, BullionVault director of research in a note, according to Reuters.

Alongside trade developments, market participants are closely watching the outcome of the Fed’s two-day policy meeting, which concludes Wednesday. The US central bank is widely expected to keep interest rates unchanged in the 4.25%–4.50% range for a third straight meeting.

Investors will pay close attention to the Fed’s policy statement and Chair Jerome Powell’s press conference for insights into how policymakers view the economic outlook and the potential inflationary impact of new tariffs.