GOLD PRICED in the Dollar fell back from yesterday's rebound ahead of the Federal Reserve's first interest-rate decision under the new Trump administration on Wednesday, while new data showed the US trade deficit jumping to a new record.

 

The USA imported $122 billion more in goods than it exported in December.

 

That deficit topped the previous trade-in-goods record of March 2022, as businesses rushed to stockpile foreign-made products ahead of Trump imposing universal trade tariffs of 10% – a threat delayed so far. 

 

Coupled with expectations that the Fed wouldn't cut rates for the first time since July's decision, that news buoyed expectations that Trump will move to implement trade tariffs sooner, driving up the Dollar and knocking $15 off the price of gold down to $2755 per Troy ounce.

 

 

Longer-term, the USA's trade deficit in goods has swollen by 736% in nominal Dollar terms over the past 3 decades.

 

Gold priced in Dollars has risen by 597%, making it the best-performing asset of the 21st Century so far.

 

 

New York stock markets also edged lower on Wednesday, cutting 0.6% off the tech-heavy Nasdaq index as AI chipmaker Nvidia (Nasdaq: NVDA) sank by 4.5%, falling back towards the sudden 3-month low set on Monday after the launch of Chinese AI model DeepSeek hit Wall Street's assumption that the technology will need ever-more new and expensive chips.

 

While betting on today's Fed decision is near-unanimous in forecasting 'no change' to overnight interest rates, the odds of a cut in March have risen from 1-in-4 a week ago to 1-in-3.

 

May remains an evens shot for the Fed's next cut, according to trader positioning tracked by the CME derivatives exchange's FedWatch tool, with the odds on June seeing lower rates than today rising from 2-in-3 last Wednesday to 3-in-4.

 

Despite promising to reduce US consumer-price inflation, "If you don’t make your product in America," President Trump said by videolink to the World Economic Forum in Davos last week, "then, very simply, you will have to pay a tariff – differing amounts, but a tariff – which will direct hundreds of billions of dollars and even trillions of dollars into our Treasury to strengthen our economy and pay down debt."

 

Washington's longer-term borrowing costs snapped a 3-session drop on Wednesday's fresh record for the US trade deficit, edging 10-year Treasury bond yields up to 4.54% per annum while 30-year yields held at 4.78% – the most costly in over a decade when reached in late-2023.

 

The threat of universal tariffs impacting precious metal imports saw a flood of metal from London to New York across December and into January, and it's left the cost of borrowing gold in London higher for short-term loans than long-term deals, reflecting tight availability of trucks and manpower for arranging new shipments.

 

But the incentive for new shipments of gold – peaking at $40 per ounce ahead of Trump's inauguration, far above normal levels but well below 10% on a $2700 gold price – has since eased to $7 between the CME's most active Comex future and London spot bullion, while the Ny-Lon gap for silver has eased to 50 cents.

 

Silver prices today ran contrary to gold for the 2nd session running, spiking towards a 3-session high near $31 per Troy ounce.

 

With the USA already running a deficit of domestic supply to demand for the industrially-useful precious metal, there's "uncertainty ahead" for global silver mining output, say specialist analysts Metals Focus, with the share of new output coming from silver-only mines falling from 32% to 28% over the past decade, leaving by-product from copper mines – driven by copper prices rather than responding to market signals for silver – "largely capturing" the shortfall.