Gold Price Rebounds 2% as Dollar Falls Amid US-China Tensions
Monday, 6/02/2025 14:51
GOLD PRICES surged as much as 2.0% on Monday as the US Dollar sank towards this spring's 3-year lows amid fast-worsening tensions over the Trump White House's trade policies plus new military tensions in US-China and Europe-Russia geopolitics,
writes Atsuko Whitehouse at BullionVault.
Falling 0.7% in May to record
gold's first monthly loss of 2025, the spot bullion price today jumped to hit $3360 per Troy ounce around Monday lunchtime in London.
That was a new record high when first reached 6 weeks ago.
The US Dollar today hit 6-week lows on its trade-weighted index against the rest of the rich world's major currencies, testing its weakest DXY reading since April 2022 - immediate aftermath of Russia invading Ukraine - as Washington and Beijing accused each other of violating their recent trade deal.
"There's no reason to sugarcoat it. The threat China poses is real. And it could be imminent," said US defense secretary Pete Hegseth in a speech Saturday, warning the Shangri-La Dialogue summit in Singapore about Beijing's desire to annex Taiwan by force.
"Hegseth deliberately ignored the call for peace and development by countries in the region, and instead touted the Cold War mentality for bloc confrontation," replied a spokesperson for China's foreign ministry.
Trump meantime doubled tariffs on all steel and aluminum imports into the USA to 50%, effective Wednesday, and prompting talk of "countermeasures" from trading partners including China and the European Union.
"The strength of the US Dollar comes partly from its institutional integrity: the rule of law, independence of central banking and policy that's predictable," says Michael de Pass, global head of rates trading at an American market-making firm Citadel Securities.
"The last three months have called that into question."
"Gold's rally is associated with the US Dollar partly losing its store of value function," says Canadian brokerage TD Securities' senior commodity strategist Daniel Ghali.
But while the Dollar fell on Monday, gold priced in Euros and UK Pounds also climbed sharply, rallying by 1.1% towards 1-week highs above €2930 and £2474 per Troy ounce respectively.
"We are moving to warfighting readiness," said UK Prime Minister Keir Starmer today, warning of "growing Russian aggression" against the world's 6th largest economy ahead of this month's Nato military alliance summit in The Netherlands.
Russia was hit at the weekend by massive drone attacks launched by Ukraine, destroying perhaps $7 billion-worth of strategic bombers stationed at 4 airfields.
Russian and Ukrainian officials were due to meet in Istanbul, Turkey today to continue only their second round of direct peace talks since 2022.
China's mainland financial markets were meanwhile closed on Monday in observance of the Dragon Boat Festival.
But other Asian shares plunged, with the Hang Seng in Hong Kong falling as much as 2.7% before closing down 0.7%, while the Nikkei in Japan fell 1.3%.
European stocks also declined, with the EuroStoxx 600 falling 0.3% as US stock futures pointed lower following New York's biggest monthly increase since late 2023.
Western government bond prices also fell, pushing up 10-year US Treasury yields – a benchmark rate for government as well as many financial and commercial borrowing costs – by 3 basis points from Friday's 2-week low of 4.36% per annum.
The price of silver – primarily an industrial metal – rose to $33.28 per Troy ounce, only 0.9% higher against the falling Dollar than last weekend's level.
That relative weakness pushed
the Gold:Silver Ratio back above 100 for the first time in 4 sessions.
Platinum – which sees two-thirds of its demand from industrial uses, led by auto-catalysts – fell 1.1% to $1046 per ounce, pushing its discount to gold near a one-month high of $2300 after
the price of platinum hit 2-year highs.
The price of palladium – of which Russia is the No.1 miner – rose 0.4% to $978 per ounce.
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