GOLD and SILVER PRICES fell again in London on Tuesday, trading down to 1-week and 2-week lows respectively ahead of tomorrow's Federal Reserve decision on Dollar interest rates as the "blow out" in New York futures prices eased further despite ongoing fears over the impact of Donald Trump imposing blanket trade tariffs on all imports to the US, including bullion bars, when he returns to the White House next month.

 

Gold then dropped back to $2635 and silver hit $30.30 per Troy ounce after new US data said retail sales in the world's largest economy beat analyst forecasts for last month, but thanks only to a jump in autos as dealers and  importers rush to book deliveries ahead of Trump's re-inauguration.

 

 

"Talk about tariffs has been all the rage of late," says a note from bullion-market analyst Rhona O'Connell at brokerage StoneX, "[with] the threat by President-elect Trump to impose tariffs on imports from Mexico and Canada expand[ing] into fears of tariffs on gold and silver more broadly."

 

"If gold and silver are covered by [Trump's] tariffs," says Jonathan Butler, head of business development at Japanese conglomerate Mitsubishi's precious metals trading division, "it could make it extremely expensive to import gold and silver to deliver on the futures exchanges.

 

"A 10% tariff would represent a ‘premium’ of close to $300 and $3 on gold and silver respectively."

 

 

Chatter over that risk last week saw a blow-out in EFP rates – the cost of an 'exchange for physical' contract, needed by dealers in New York to cover the risk of having to source bullion to settle a client's gold futures contract trade – as the gap between London spot quotes and New York's most active futures contract spiked to $60 per ounce on Wednesday.

 

That was the widest NyLon gap since the $120 level hit when the UK went into Covid lockdown in late-March 2020, and the surge "cascaded through into the spot price and generated last week's rallies," says O'Connell, even though – in her view – "tariffs on either metal, especially gold, are unlikely."

 

February Comex gold – now New York's most active gold futures contract on the CME derivatives exchange – today held $17 per Troy ounce above London spot bullion quotes, well outside the  typical spread but less than 1/3rd last week's spike.

 

"It is understandable that some traders – or their risk officers (as was the case during the pandemic) – want to eliminate any possibility of being caught up in any fall-out," says O'Connell at StoneX.

 

But while Trump's tariffs continues to spook America's trading partners, "The [bullion] market remains relatively sanguine about prospects for further dislocation," says Butler at Mitsubishi, because "it is a very different situation to the last time EFPs blew out in March 2020 when there was a widespread panic about the availability of gold to deliver against expiring Comex contracts, since Swiss refiners had closed due to the pandemic and many international flights had been suspended.

 

"This time, refiners are operating normally, flights between London and New York are operating as scheduled (gold and PGMs are normally flown across the Atlantic) and Comex inventories are healthy."

 

Worries over Trump's tariffs crushing Chinese export sales last month saw investment and other capital outflows from the world's 2nd largest economy leap to a record $45 billion, new data from Beijing's FX regulator said today.

 

"It's not the greatest time to have a vacuum," said Alberta premier and key Justin Trudeau critic Danielle Smith of the Canadian Prime Minister overnight after his finance minister Chrystia Freeland – who was negotiating with Team Trump ahead of January 2025's inauguration – quit over Trudeau ignoring her warnings that big government spending plans risk higher borrowing costs and a weaker Canadian Dollar if new US trade tariffs go ahead.

 

Looking ahead, "potential disruption from Trump tariffs and wider economic and political uncertainty remains a key supportive factor for the precious metals complex as we approach 2025," says Butler at Mitsubishi, "and the potential for volatility is high...amid the seasonal festive slowdown" in trading volumes.