Gold Hits Record CAD, MXN Prices as Trump's Tariffs Crash US GDP Forecast
Tuesday, 3/04/2025 17:55
GOLD rose in all major currencies on Tuesday and hit fresh all-time highs in both Canadian Dollars and Mexican Pesos as Donald Trump's 25% trade tariffs against the USA's northern and southern neighbors took effect, spurring fears of the steepest US economic recession since the Covid Crash.
Having forecast annualized growth for the US economy of 2.3% between January and March as recently as a fortnight ago, the Atlanta Fed's GDPNow estimate for Q1 has sunk to minus 2.8%, almost twice the crash predicted in last week's update.
"Escalation into
a wider global trade war could be more damaging," says Jonathan Butler, head of business development & strategy at the precious metals division of Japanese conglomerate Mitsubishi.
"In such a scenario, gold would be
in even greater demand as a risk hedge and portfolio diversifier among investors and central banks [but] the more industrial-facing white metals’ prospects may be dampened."
Silver today rallied close to $32 per Troy ounce before edging back, while platinum and
palladium prices also halved last week's steep drops.
The Mexican Peso fell for the 4th session running, nearing its 2022 lows as Trump's 25% import tariffs took effect, while the Canadian Dollar fell towards last month's 22-year lows, hit when Trump first announced but then 'suspended' 25% tariffs on US imports from the north.
With physical gold priced in US Dollars peaking at $2927 per Troy ounce at the start of New York trade – $30 below late-February's fresh spot-market record – that put the CAD price of gold at C$4233, a fresh all-time high.
Gold in Euros meantime rallied to but then eased back from €2777 per ounce, some 2.7% below mid-Feb's peak, as Germany's CDU leader – the likely next Chancellor after last month's parliamentary elections – called
Friday's Oval Office clash between Trump and Ukraine's President Zelensky a "deliberate escalation" by the US President.
Western stock markets sank, with Canada's TSX down 2.2% on the day and the USA's own S&P500 index now 3.2% lower for the week so far, while Europe's EuroStoxx 600 index lost 2.0% from last night's new record high close – its worst 1-day drop since early August.
In contrast to Japan, Europe and the Americas, China's stock market ended Tuesday little changed as Beijing – the USA's 3rd biggest export destination behind Canada and Mexico – vowed to retaliate with tariffs against US food shipments after President Trump doubled import duty to 20% for goods from the world's 2nd largest economy.
That update to
the Atlanta Fed's GDPNow estimate saw betting on US interest-rate futures rush to put 50-50 odds on the Federal Reserve cutting the cost of borrowing again as early as May, rather than waiting until July as the consensus position had previously suggested on data from the CME derivatives exchange's FedWatch tool.
Crashing the economy "is all part of Trump's master plan," claims one view shared on X.com, "to get the Fed to cut [rates from 4.5%] to 3.0% and end QT [bond selling].
"He'll then lift the tariffs to ignite a roaring bull market."
The stock market is Trump’s "traffic light" for policy shocks, claimed US financial giant Bank of America's strategist Michael Hartnett last week.
"It’ll tell him to go and stop", Hartnett told Bloomberg, adding that further trade tariffs against China were "among the least-likely scenarios" for White House policy.
Washington's 10-year borrowing costs today sank to 4.14% per annum – the lowest since mid-October and 2/3rds of a percentage point below January's 14-month high – as the stock market plunged and bond prices jumped.
Trump's vice-president J.D.Vance meantime infuriated UK pundits and politicians – including
Trump's right-wing ally Nigel Farage – after claiming that only the US could provide peacekeeping forces for any Ukraine-Russia peace deal, rather than "some random country that hasn't fought a war in 30 or 40 years."
France's right-wing opposition leader Marine le Pen today
condemned the "brutality" of Trump's overnight decision to suspend US aid and military supplies to Ukraine.
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