Amidst the chaos, buy gold! Trump's flip-flop fails to ease market panic, gold prices once again approach historic highs.

Gold continued to edge higher after posting its biggest one-day gain in 18 months, as US President Trump's tariff agenda confused the market, prompting investors to buy precious metals for safe-haven purposes.

On Wednesday, the market experienced sharp volatility, with gold surging as much as 3.9% and eventually closing up 3.3%. During Thursday's Asian session, gold broke through the $3,120 level, just $50 short of the all-time high set last week. By 2025, it had already risen by more than $400.

The erratic nature of the US government's tariff plans has unsettled global markets, with investors scrambling for direction and certainty. This typically supports gold, which has risen 18% so far this year. Hopes for further monetary policy easing by the US Fed and central bank purchases have also boosted gold prices.

In the previous trading session, gold initially surged after US tariffs on about 60 trading partners took effect, exacerbating market turmoil and increasing concerns about a global economic downturn. Subsequently, Trump announced a 90-day suspension of plans to raise tariffs on 56 trading partners and the EU, which will now be taxed at a baseline rate of 10%.

Markets rebounded after Trump announced the tariff hike suspension. US stocks had their best day since the financial crisis, with the S&P 500 surging nearly 10%, after teetering on the edge of a bear market the previous week.

The head of commodity strategy at TD Securities said, "Ultimately, gold is still seen as a hedge against instability. We are facing a situation where tariffs are becoming a big issue, and inflation expectations are also rising, which is reflected in higher yields."

According to the latest released US Fed meeting minutes, Fed policymakers almost unanimously warned last month that the US economy faces risks of rising inflation and slowing growth, with some pointing to potential "difficult trade-offs" in the future.

The CME FedWatch Tool shows that traders expect a 72% chance of a US Fed rate cut in June.

A market strategist said that as the global economy faces unprecedented uncertainty, gold will continue to outperform silver. Nicky Shiels, head of research and metals strategy at MKS PAMP, raised her 2025 gold price forecast in her latest precious metals report, while lowering her outlook for silver.

She stated in the report: "As tariff announcements solidify a volatile environment for hedging, defense, and safety, which will keep gold in play, our 'reflation' base case has been significantly delayed. The silver forecast has been revised downward (too optimistic relative to macro changes and the negative impact of tariff policies on growth and demand)."

Shiels now expects gold prices to average around $2,950 per ounce this year, up from her initial forecast of $2,750. She said that while gold prices are rising, investors should expect higher volatility in the current market environment. Shiels stated, "Although gold will not be immune to liquidity-driven global de-risking events, wealth destruction in the global economy will benefit precious metals."

She stated in the report, "Stagflation is coming, as demand destruction cannot last forever; prices will be passed on to consumers, and this does not even take into account the fact that the uncertainty of tariff policies will push up consumer inflation expectations. An analysis of the performance of precious metals and asset classes under four different macroeconomic regimes from 2009 to 2024—Goldilocks, reflation, stagflation, and deflation—highlights that gold performed best (+12.1%), providing consistent protection during all stagflation periods."

Shiels said that ultimately, as economic activity slows and inflationary pressures rise, gold prices will move higher.

Looking at silver, Shiels expects silver prices to average $34.50 per ounce this year, down from her initial forecast of $36.50.

Shiels said that while silver investment demand is expected to remain strong this year, declining industrial demand due to the global economic slowdown will outweigh investment demand.

She said: "Given the expected negative impact of the global trade war, silver's industrial demand should be under pressure. Unless a new catalyst emerges, silver will remain more comfortably in the $28-35 range. The prospect of a significant rise in silver to $40/oz, driven by gold's outperformance and substantial reinvestment, depends on a more accommodative US Fed policy and a significant rollback in trade war policies and rhetoric. If anything changes, it is only likely to happen in H2 2025."

Shiels' updated outlook was released against the backdrop of gold significantly outperforming silver, with the gold-silver ratio hitting a five-year high earlier this week, exceeding 106.