The price of gold has rocketed since Donald Trump announced his disastrous tariffs – and this is more significant than you might think.

Gold reached all time high of $3,223.30 (£2,460) per ounce last night as Trump’s trade war intensified, with the US proposing a massive 145% levy on Chinese imports in response to Beijing’s 125% retaliatory tariff on American goods. Even if you don’t own any gold, or aren’t planning on buying any, this is a development worth paying attention to. That’s because gold is a ‘safe haven’ asset that typically gets more valuable in times of major financial crisis, when traders look to ditch stocks and shares to switch to a more steady, reliable investment.

During times of market instability, investors, major companies and central banks often buy gold because it is seen as a “safe-haven” asset, retaining its value when other investments, such as stocks or bonds, become more volatile.

This was seen in the early days of the Covid pandemic, when gold prices rose by 15% in the space of just a few weeks as investors scrambled to buy the commodity, and shelter themselves from deep shocks on the stock market. A similar pattern also emerged in the aftermath of the 2008 global financial crisis.

Gold being a real tangible asset also adds to its appeal. Unlike currencies, gold cannot be devalued by central banks printing more money, meaning it is less vulnerable to inflation. It can also be quickly sold for cash if needed.

Any signs of instability on the global stage – such as traders hoarding gold – are not good news for Britain, as financial services make up about 8-12% of our national economy.

Many foreign companies provide essential services we use every day, and we rely heavily on goods imported from abroad, meaning we are particularly exposed to economic developments that take place elsewhere in the world.

After years of stagnant living standards and sluggish growth under the Tories, the Labour Government has set an ambitious target of growing the UK’s GDP by 2.5% per year. As was the case during previous periods of higher growth in the UK, this would naturally lead to higher wages, greater opportunities for young people, and more funding for public services.

While the Office for National Statistics have just reported a higher-than-expected growth rate of 0.5% for February, some economists have warned that the economic instability unleashed by Trump’s tariffs means we are already likely to falling behind this figure since February, suggesting low growth is likely to continue.

That remains to be seen. Before Donald Trump made a U-turn on his more extreme tariffs to focus solely on China, many worried analysts had been increasing their predictions of a recession in the US this year.

Banking giant Goldman Sachs had circulated a memo to staff indicating a 65% chance of recession on Wednesday, before quickly dialling this down to 45% in the hours following the new announcement.

But an escalating trade war between China and the US – by far the two largest economies in the world – means that things remain in a much more unstable place than they did even a couple of weeks ago.

Financial markets, which have still not regained most of the trillions lost during the crash earlier this week, remain jittery, and Trump’s unpredictability means they are likely to remain so for the foreseeable future.

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