On Friday, spot gold prices hit $2,807, a record high, after Trump threatened to impose tariffs again, prompting investors to turn to safe-haven assets.

Trump reiterated plans to impose 25% tariffs on imports from Mexico and Canada and is considering additional taxes on Chinese goods.

“This rally is likely to continue as long as there is uncertainty in the market,” said Nitesh Shah, commodity strategist at WisdomTree. “A lot of the uncertainty today is due to uncertainty about whether and how tariffs will be implemented.”

In addition, Paul Williams, managing director of Solomon Global, said in a report that gold's rise to record highs was not just driven by the president's controversial policies. He noted that global geopolitical uncertainty remains high.

“Gold’s performance highlights the complex interplay of global factors shaping today’s economy,” Williams said. “This is not a temporary spike or a ‘Trump shock,’ but a reflection of an uncertain geopolitical landscape and deep-seated instability in the global economy. The changing world order is becoming increasingly unstable, making gold an attractive option for hedging risk and protecting wealth.”

In addition to trade tensions and geopolitics, steady buying demand from central banks is a key factor supporting gold. "We view central bank buying as the strongest structural force in the gold market," said Carsten Menke, an analyst at Julius Baer.

Traders will now turn their attention to the upcoming release of the U.S. personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation indicator. The report could provide new clues on the Fed's next policy move. Earlier this week, Fed Chairman Jerome Powell reiterated that interest rate decisions will depend on inflation and labor market conditions.

Meanwhile, U.S. GDP data released Thursday showed the economy grew at an annualized rate of just 2.3% in the fourth quarter, below expectations. However, consumer spending grew at its fastest pace in nearly two years, suggesting inflationary pressures could persist.

U.S. Treasury yields rose slightly on Friday as investors adjusted their positions ahead of the release of important U.S. economic data, including the PCE inflation report, personal spending and employment cost data.

The Fed kept interest rates at 4.25%-4.50% at its first meeting of the year, citing inflation risks despite political pressure to cut rates. Powell noted that the Fed needs to see "real progress on inflation or weakness in the labor market" before considering adjustments. As policy uncertainty hangs in the balance, gold remains a powerful hedge.

Given factors such as trade tensions, central bank purchases and inflation concerns, analysts believe that gold has further upside potential. "If a scenario of high inflation and slow growth materializes, then the $3,000 price level becomes increasingly feasible," said Ricardo Evangelista, senior analyst at ActivTrades.

Michele Schneider, chief strategist at MarketGauge, recently said that if gold prices clearly break through $2,800 an ounce, it could easily reach $3,000.

Although gold prices have hit record highs, investor demand for gold and silver ETFs remains quite sluggish, which shows that the market still has a lot of potential, said Robert Minter, head of ETF strategy at ABDN.

Minter added that he expects it is only a matter of time before investors turn to gold as a safe haven asset because current market conditions are like "trading in a ballroom. You can't see what's going to happen next."

However, high prices have weakened demand for physical gold, especially in India, where buyers are awaiting the outcome of the federal budget on Feb. 1. While this may create short-term headwinds, overall sentiment remains bullish.

Article forwarded from: Jinshi Data