Gold prices dipped in New York trading on Thursday as April futures contracts settled at $2,879, down declining $43.90 or 1.5 per cent.
President Donald Trump’s unexpected tariff announcements triggered the selloff, creating a somewhat ironic, counterintuitive market reaction. Investors have allocated capital to safe-haven assets like gold to hedge against uncertainties surrounding tariffs’ impact on global trade flows. Initially, Trump promised to delay implementing tariffs on both Canada and Mexico until April 2.
However, the President announced today that tariffs of 25 per cent on goods imported from Canada and Mexico would take effect next Tuesday, alongside the 10 per cent tariff already imposed on Chinese imports earlier this month.
“We cannot allow this scourge to continue to harm the USA. Tariffs would be imposed until it stops, or is seriously limited,” Trump stated on his Truth Social media platform.
This is the third time in recent weeks that its price has dropped by $40 or more in a single session, following a $63 decline on Friday, February 14.
A strengthening U.S. dollar substantially drove gold’s retreat, as the dollar index climbed 0.74 per cent to 107.22. Analysts estimate that dollar strength accounted for about half of gold’s price decline today. Meanwhile, direct selling pressure in the gold market caused the rest.
Both Mexico and Canada have indicated that they will impose reciprocal tariffs on U.S. imports if Trump follows through with his threats. Economic analysts warn that escalating trade tensions could slow economic growth and potentially increase inflation across all three North American countries.
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Trump tariffs could have downstream effects on gold
Market attention now shifts to tomorrow’s Personal Consumption Expenditures (PCE) Price Index report. According to FactSet’s consensus estimates, January’s PCE inflation likely rose by 0.3 per cent month-over-month and 2.5 per cent year-over-year. These figures suggest inflation remains stubbornly higher than Federal Reserve officials and investors had hoped for.
Persistently elevated inflation will likely force the Federal Reserve to keep its benchmark fed funds rate at current levels, rather than initiate the rate cuts many had anticipated to normalize interest rates.
President Trump’s tariffs could significantly impact gold production, recycling, and jewellery manufacturing. Tariffs on key imports may increase mining costs. For gold miners like Calibre Mining (TSE: CXB) (OTCMKTS: CXBMF), higher tariffs on mining equipment could reduce efficiency and push up extraction costs. This could lead to lower production or higher gold prices.
Similarly, tariffs could raise the cost of recycled gold, particularly by increasing the price of recycling equipment or logistics. This would reduce the competitiveness of recycled gold compared to newly mined gold.
Gold jewellery manufacturers would also feel the strain, as tariffs may disrupt supply chains, especially for raw materials or finished products. Companies like Newmont Corporation (NYSE: NEM) (TSE: NGT) could see their jewellery-making partners face higher production costs or delays.
Such changes could lead to higher retail prices for consumers, as manufacturers pass on increased costs. These tariff-induced pressures may disrupt the gold market and affect production, recycling, and manufacturing in the sector.
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