Gold Hits Fresh Records as Trump's 'Trade War' Whacks Stocks
Monday, 2/03/2025 15:35
STOCK MARKETS sank and gold prices leapt to new all-time highs on Monday after US President Donald Trump imposed trade tariffs on the import of all goods from Canada, Mexico and China – the USA's top 3 trading partners,
writes Atsuko Whitehouse at BullionVault.
Having already sent
gold to new heights Friday by vowing trade tariffs, Trump then confirmed a levy from Tuesday 4th February will add 25% to the cost for importers of receiving goods from Canada and Mexico, plus 10% on all Chinese imports.
New York's S&P500 index lost 1.8% in the first hour of trade Monday. Gold in contrast leapt 0.7% from Friday's record high.
Trump also vowed "definitely" to hit the European Union with tariffs because "they've [also] really taken advantage of us" and "treated us terribly" by failing to buy US products while making heavy exports to the world's largest economy.
With the EuroStoxx 600 index losing 1.3% today, gold priced in Euros spiked to €2739 as Asia opened and then jumped again to yet another new high above €2760 per Troy ounce – 1.7% above Friday afternoon's new all-time high – after new data said manufacturing activity across the 20-nation currency union contracted yet again in January, even before Trump's direct promise of anti-EU trade tariffs.
Canada's TSX stock index sank by 2.6% while the price of gold in Loonies jumped 1.7% as the Canadian Dollar dropped to its weakest USD exchange rate since 2003.
Hitting new all-time highs in Japanese Yen, Indian Rupees, UK Pounds, Aussie Dollars, Swiss Francs and all other world currencies, gold also set a new all-time high in the US Dollar above $2828 even as January's US manufacturing surveys pointed to activity rising nationwide.
Within those surveys, US purchasing managers reported the prices they paid rising at the fastest pace since May as a rush to land imports ahead of Trump's inauguration raised costs across cross-border and domestic supply chains.
America's
trade deficit in goods already hit a new record in December as businesses rushed to stockpile ahead of tariffs.
"With all the experience I have had in the past 37 years in the bullion market, this has never happened in either Comex or Tocom," says Bruce Ikemizu, head of the Japan Bullion Market Association, commenting on
the flood of gold bullion out of London and into Comex-approved US warehouses ahead of Trump's new tariffs.
"The question is who's gonna take delivery of so much physical gold at such high premiums? As soon as they do, [bullish Comex traders will] lose $30-40 per Troy ounce. And that premium goes to the [bank] traders who did this arbitrage.
"I wish I was still trading in the bank's trading desk."
Looking more broadly, "This could be a trade war on steroids," says Ryan Sweet, chief US economist at UK consultancy Oxford Economics, comparing Trump's weekend announcements against China, Mexico and Canada with the more limited trade action against China and G7 allies seen during the celebrity real-estate mogul's first term in office.
Canada's Prime Minister Trudeau overnight announced that 25% tariffs on C$155 billion worth of US goods will start Saturday, while Mexican President Claudia Sheinbaum also pledged retaliation.
China also vowed "corresponding countermeasures" to Trump's 10% levy on Chinese products, without immediately announcing any new tariffs amid the world No.2 economy's ongoing Lunar New Year holidays.
"Our economists expect that fully implemented tariffs would have meaningful consequences," says US investment bank Morgan Stanley's Public Policy Research Team, forecasting that a recession in Mexico will become the base case, US inflation could be 0.3 to 0.6 percentage points higher over the next 3 months, and US growth could be 0.7 to 1.1 points lower over the next year.
Silver prices in contrast to gold failed to regain Friday's 7-week high amid Monday's Trump trade tariff slump in world stock markets.
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