Trump's Tariff Stick Targets Canada and Mexico, Safe-Haven Demand Boosts Gold Prices
Trump plans to impose a 25% tariff on Mexico and Canada, leading to a slight increase in gold prices, with spot gold approaching $2,720 per ounce. This move could trigger a trade war, and Trump is considering imposing a universal tariff on all imported goods. Silver futures prices rose at one point, as the market became volatile due to the tariff measures. Investors are focused on inflation prospects, which may limit the Federal Reserve's ability to ease monetary policy. Increased demand for safe-haven assets could further boost gold prices
According to Zhitong Finance, gold prices rose slightly after U.S. President Trump announced his plan to impose a 25% tariff on Mexico and Canada early next month. On Monday, gold prices continued to rise slightly, approaching $2,720 per ounce, as traders weighed the potential impact of the U.S. imposing tariffs of up to 25% on its neighbors. As of the time of writing, spot gold was up 0.4% at $2,718.81 per ounce, a slight increase of 0.2% on Monday. The Bloomberg Dollar Spot Index rose 0.4%.
If implemented, this move could trigger a trade war. Trump also stated that he is still considering imposing a universal tariff on all foreign goods imported into the U.S., but he said he is "not ready yet."
After Trump's speech, silver futures surged, with the March contract price briefly rising 0.8% to $31.375 per ounce before retreating. Mexico is the largest silver producer, and it is currently unclear whether the tariffs will apply to silver imports. Nevertheless, in recent weeks, both silver and gold could be affected by comprehensive tariff measures, causing market turbulence, as traders sold short positions, pushing the premiums for New York deliverable futures to higher levels.
Investors are also weighing the inflation outlook, as Trump's domestic agenda of tax cuts and increased spending could point to sustained price pressures this year. This may limit the Federal Reserve's ability to continue easing monetary policy. Higher borrowing costs typically pose a disadvantage for gold, as it does not pay interest.
Gold prices set a series of record highs in 2024, driven by the Fed's shift to accommodative monetary policy, geopolitical tensions, and central bank purchases. Concerns over the new president's immigration policies, along with increasingly strained relations between the U.S. and other countries, may further boost demand for safe-haven assets like gold.
Elsewhere, traders are watching the impact of the long-delayed ceasefire agreement in the Gaza war, as Hamas released three female hostages in exchange for 90 Palestinians held in Israeli prisons