Volatility Hits Gold and Silver Prices on 'Tweak' to Trump's Trade Tariffs
Monday, 1/06/2025 14:09
GOLD and SILVER PRICES reversed earlier losses on Monday only to drop again versus a fast-falling Dollar following reports of a possible shift in President-elect Donald Trump's plans for US trade tariffs,
writes Atsuko Whitehouse at BullionVault.
Trump's aides are exploring plans to apply trade tariffs to every partner nation but only covering critical imports says the
Washington Post, citing three un-named sources.
The report saw the US Dollar lose almost 1.0% from Friday's new 2-year high on its trade-weight DXY index, while Washington's borrowing costs also slipped from an 8-month high on benchmark 10-year US Treasury bonds.
With the Dollar Index making its largest 1-day drop since November, spot gold prices climbed $20 per Troy ounce from an overnight drop to $2625 – a
new all-time gold high in September – only to reverse that move as New York trading began.
The
price of silver meantime leapt by 2.9% in London trading, reaching a 2-week high above $30.30 per Troy ounce before dropping back, as physical bullion closed the gap with New York futures contracts spurred by concerns over
10% trade tariffs hitting US imports of the industrially useful precious metal.
"The news [from
the Washington Post appears to be] driving the US Dollar lower, challenging an elevated long position, while
adding risk appetite into commodities and stocks," says derivatives platform Saxo Bank's commodity strategist Ole Hansen.
"Trump's election win in November has provided one of the most favourable scenarios for gold, due to the likelihood of elevated US fiscal spending and increased geopolitical uncertainty," says Michael Haigh, head of commodities research at French bank Société Générale, forecasting that gold prices will rise to $2900 per Troy ounce by the end of 2025.
During Trump's first term, gold prices rose by 55.6%, peaking at $2075 per ounce in August 2020 as the Covid-19 crisis hit the world.
US inflation slowed by 1.1 percentage points during Trump's first term, while
the Republican's 4-year administration added over $8 trillion to the US national debt, according to the Committee for a Responsible Federal Budget.
Gold has climbed another 41.9%
during President Biden's time in the White House, peaking at $2790 in October.
During Biden's term, inflation in the cost of living in the US has accelerated by 1.3 percentage points per year, and his administration
approved $4.3 trillion in unfunded spending during its first three years and five months.
"The big difference between now and when Trump was in office the first time is the level of deficit spending," Bloomberg quotes one New York portfolio manager.
The US national debt has risen to about $35 trillion from less than $26 trillion at the end of 2016, and the federal deficit is projected to exceed 6% of gross domestic product in 2025,
according to the Congressional Budget Office.
Gold priced in Euros and Pounds fell 0.8% to €2538 and £2108 per ounce on Monday, as both currencies strengthened against the US Dollar. The yellow metal in Euros and Pounds climbed 34.5% and 28.4% in 2024, marking their biggest annual surges since 2010 and 2016, respectively.
Priced in the Dollar,
gold surged by 26.6% in 2024, marking the ninth-highest annual return since 1971, while the greenback rose 7.5% against the developed world's other major currencies.
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