International gold prices hit a new six-year high towards the close of last week, edging briefly past the US$ 1,555 per ounce mark as trade tensions and the tariff war between the US and China flared up again last week. Experts predict further increases as investors switch to the yellow metal – considered a traditional safe haven – due to declining yields from equity and treasury instruments amidst an uncertain global economic and political scenario.

Though prices did retreat marginally as trading closed for the week, they have inched up again in Eastern markets at the start of the current one. In India, where the global tensions also impacted currency valuation, the prices in the local market in rupee terms crossed a new high of Rs 40,000 per 10 gms in some regions.

The immediate trigger to last week’s surge in prices was provided by the decisions of both the Chinese and US governments to announced fresh tariffs on imports from the other country. Early on Friday, China announced tariff increase of between 5-10% on categories of goods constituting about US$ 75 billion worth of imports from the US and the re-imposition of 25% tariff on US automobiles from December 15. This was believed to be in retaliation to an earlier announced US measure to add a 10% tariff on US$ 300 billion of Chinese imports. An almost instant response, in the form of tweets from the US President, was to announce an increase in tariffs effective October 1 from 25% to 30% on US$ 250 billion worth of goods imported from China.

The negative impact of these announcements on investor confidence was not fully compensated for by a more positive, but general statement from the Federal Reserve Chair Jerome Powell that they would "act as appropriate" to keep the US economy healthy. Markets will now await the announcement of concrete steps with regards to the Fed rate at the time of the next meet.

While the immediate surge in prices was a result of the slew of announcements on either side, most analysts point to the fact that gold prices have risen by over 20% since the start of 2019 and stress that it is extremely likely that there will be further increases before the year end since the global eco-political uncertainity behind it shows no signs of abating.