Gold prices climbed 1% Wednesday, continuing their record rally as investors sought the safe-haven asset due to concerns about the escalating U.S.-China trade war and its impact on economic growth.

The spotlight was also on U.S. jobs data this week, which could shed further clues on the path of interest rates in the world's largest economy.

Spot gold was up 0.9% at $2,868.48 per ounce by 1221 GMT, after hitting a record high of $2,877 earlier in the session. U.S. gold futures gained 0.6% to $2,892.20 per ounce.

China this week imposed tariffs on U.S. imports in retaliation against newly introduced U.S. duties on Chinese goods, fueling the trade war between the world's two largest economies.

U.S. President Donald Trump has said he is in no rush to speak with President Xi Jinping to de-escalate tensions.

"The potential economic consequences of a trade war between the U.S. and China are causing investors to fear a global recession and rising inflation," said Dominik Sperzel, head of trading at Heraeus Metals Germany.

Meanwhile, three Federal Reserve officials warned that Trump's trade tariffs could drive inflation, with one suggesting that uncertainty over price outlooks warrants slower interest rate cuts.

"In a high-risk environment, the appeal of physical gold and silver becomes even more pronounced, as they eliminate counterparty risk and provide a reliable store of value," said Alex Ebkarian, chief operating officer of physical precious metals at Allegiance Gold.

Investors this week are watching out for the ADP employment report and the payrolls report for further clues on the outlook for rates. Bullion is considered an inflation hedge, but higher rates could dampen its appeal as the metal yields no interest.

"Gold is overbought and needs to correct," said StoneX analyst Rhona O'Connell. "There is still scope for further upside, but barring any black swans we still expect to see the price topping out this year."

Gold's relative strength index is at 76, indicating that the price has surpassed the "overbought" territory that starts at 70.

Meanwhile data from the World Gold Council showed global gold demand rose 1% to a record 4,974.5 metric tons in 2024, driven by higher investment and increased central bank purchases in the fourth quarter.

Spot silver rose 0.5% to $32.25 per ounce, platinum gained 1.6% to $979.45 and palladium added 0.3% to $999.75.