- Gold hits record high amid trade war tensions, with investors seeking safe havens from looming inflation.
- Escalating U.S.-China trade war prompts investors to safeguard their funds, leading to volatility in crypto and stock markets.
- Gold and Bitcoin’s roles as inflation hedges are in focus during ongoing economic uncertainty.
The escalation of the U.S.—China trade war is already leading investors to try to safeguard their funds in fear of inflation getting out of control in the upcoming months.
This development began earlier this week after Donald Trump announced a heavy taxation increase on imported goods from several foreign nations. Notably, Mexico and Canada were hit with 25% tariffs. China faced a 10% tariff on a range of products, including electronics, automobiles, industrial machinery, and household goods.
The two North American nations were quick to try to come to terms with President Trump, potentially arranging a middle ground to avoid tariffs. China, however, retaliated by continuing the escalation by announcing tariffs on a range of American goods, including agricultural products such as soybeans and pork, as well as automobiles and electronics.
This rise of stakes caused risky markets like crypto and stock to halt any potential upward momentum, as investors anticipate not only a shutdown of any hopes of lower interest rates but also the potential for higher inflation.
As a result, investors seek out the world’s most notorious hedge against inflation to protect their funds. Today, on February 5, gold reached its all-time highest value per ounce at $2,882.
In times of economic uncertainty, gold tends to gain a substantial amount of value due to its inherent scarcity and ability to serve as a store of value. Notably, the precious metal gained over 40% in value during the COVID-19 years, proving once again its ability to protect investments against inflation.
This most recent surge in value indicates major uncertainty about the future of the world economy. Inflationary pressure has already devalued the U.S. Dollar and halted any potential upward movements for cryptocurrency assets.
In fact, Bitcoin served a similar purpose as gold in the COVID years, reaching at the time its highest ever price. While as of right now it doesn’t look like any major upward movements are happening in the Bitcoin market—it’ll be interesting to see if the world’s largest cryptocurrency can repeat its performance as a hedge against inflation in 2025.Â
The world’s largest cryptocurrency by market capitalization is still holding on near the $100k margin, currently trading at $97,688 as per CoinMarketCap. Interestingly, BTC is currently able to maintain its value better than the rest of the altcoin market. For instance, Bitcoin lost around 5.7% in value over the last 7 days. Meanwhile, Ethereum and Solana lost over 10% in value, while XRP tumbled by over 20%.
