Gold reached new all-time highs as investors raced to safer assets following US President Donald Trump’s imposed tariffs on Canada, Mexico and China, and amid threats of the same against the European Union.
Meanwhile, bullion progressed by 1.2 per cent to $2,830.74 per ounce on Monday, which beat the previous record reached on Friday, before easing off after Trump agreed to delay the tariffs against Mexico for a month.
Investors still invested heavily in gold and the Japanese yen as anxieties regarding the impact of Trump’s choices on the global economy and monetary policy hit home.
The US announced on Saturday that it will impose tariffs of 25 per cent on goods from Canada and Mexico and 10 per cent on those from China, set to take effect on Tuesday. Canadian energy imports will face a 10 per cent levy.
In response, Ottawa unveiled 25 per cent counter-tariffs on US goods, while Mexico pledged retaliatory actions. Beijing issued a statement vowing “corresponding countermeasures.” Trump has also threatened tariffs against the EU, which warned that it would respond firmly.
“These tariffs create a strong tailwind for gold,” Bank of Montreal analysts wrote in a note. “Not only because of their inherent inflationary effects but also as the USA’s increasingly hawkish foreign policy may accelerate de-dollarization plans.”
Fears of a trade war have already shaken precious metals markets, driving US gold and silver prices above international benchmarks in recent weeks. Dealers and traders have rushed huge volumes of the metals into the US ahead of potential tariffs. The turmoil has also driven up lease rates for gold and silver.
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JPMorgan delivers bullion as Trump tariffs drive gold futures sky high
JPMorgan Chase & Co promised to deliver over USD$4 billion worth of gold bullion against futures contracts in New York in February as prices and the impending tariff threat are pushing investors to the safe haven asset.
The bank announced its plans on Thursday to deliver bullion against contracts slated for expiry in February, traded on CME’s Group’s Comex. The delivery notices include 30 million ounces of gold.
Anxiety surrounding import tariffs after US President Donald Trump’s election have driven gold futures prices on Comex higher than spot prices in London. Specifically, spot prices hit record highs this week, but the additional premium on Comex has created a lucrative arbitrage opportunity for the few banks capable of quickly flying bullion between key trading hubs.
Other Comex contracts have shown similar pricing dynamics, and the disparity has grown so large that traders have begun flying silver into the country. The precious metal is usually too cheap and bulky to justify airfreight costs, but one industry veteran says they have never seen it happen before.
Traders buy and sell millions of ounces of gold on Comex every day, but only a small fraction typically goes to physical delivery, as most long positions are rolled over or closed out before expiration.
Banks often use the exchange to hedge positions in London, the largest trading hub, by offsetting longs with paper short positions in New York. Since the US election, however, physical inventories in the exchange’s depositories have surged by 13 million ounces, representing about USD$38 billion in gold.
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Gold will benefit from rate cuts, concerns over inflation, and central bank buys
Observers remain uncertain whether JPMorgan and other banks delivered bullion physically to profit from an arbitrage opportunity or simply used the deliveries to exit existing short positions.
JPMorgan issued delivery notices for 1.485 million ounces of gold to fulfill physical delivery for the February gold 100-ounce contract, with deliveries scheduled for Feb. 3. That represented roughly half of the total to be delivered, while Deutsche Bank AG, Morgan Stanley, and Goldman Sachs Group Inc. accounted for most of the remainder.
The price of gold hit an all-time high on Thursday on a weakened dollar as indicated by new US economic data.
Spot gold rose 1.2 per cent to USD$2,793.25 an ounce, having hit a record USD$2,798.50 earlier in the session. US gold futures gained 1.9 per cent to $2,846.20 per ounce.
The 2025 LBMA Survey forecasts gold reaching USD$3,290, with an average price of USD$2,736.69, a 14.7 per cent increase from 2024. Analysts cite Federal Reserve policy (28 per cent), central bank demand (21 per cent), and geopolitical risks (15 per cent) as key drivers. Gold stands to benefit from rate cuts, inflation concerns, and strong central bank purchases.
India’s Budget on February 1 could either boost or weaken gold demand in the country.
Chinese gold premiums rebounded to USD$4.40 per ounce in December 2024 after falling to a USD$40.60 per ounce discount in October, driven by seasonal demand ahead of the Lunar New Year. Premiums had peaked at USD$85.60 per ounce in early 2024 but declined over the summer as prices surged. China’s central bank resumed gold purchases in November, increasing reserves to 72.96 million troy ounces.
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joseph@mugglehead.com
