Tariff Tantrums: Gold Prices Recover Losses as Safe-Haven Demand Returns
Investing.com – Gold prices hovered around breakeven Thursday as safe-haven demand returned as traders feared the prospect of a global trade war after President Donald Trump said the U.S. will impose tariffs on steel and aluminium imports as early as next week.
Gold futures for April delivery on the Comex division of the New York Mercantile Exchange rose by $0.90, or 0.06%, to $1,318.60 a troy ounce.
Trump said the US will impose a 25% tariff on steel imports and 10% tariff on aluminium. The highly controversial move raised fears that the U.S.’s main trading partners including China could take countermeasures, triggering a global trade war.
The EU was said to be drawing up a list of US products to target, including orange juice and bourbon.
"The EU stands ready to react swiftly and appropriately in case our exports are affected by any restrictive trade measures from the U.S.," a European Commission source told CNBC.
While China’s commerce ministry in February said: “If the final decision from the US hurts China’s interests, we will certainly take necessary measures to protect our legitimate rights.”
Retaliation from China is seen as the biggest threat as sectors of the US economy including farming are highly dependent on demand from China.
While the move was expected, a sharp reaction was seen in markets: Riskier assets like stocks were dumped for well-known safe havens like the yen and gold.
Prior to the announcement gold prices had been under pressure – trading about $10 offside – after Fed member Bill Dudley said four-rate hikes would fit within the Fed’s plan to raise rates gradually.
Safe-haven currencies like the yen and Swiss franc pared losses, leaving the greenback nursing heavy losses, adding further support to the precious metal.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold cheaper for holders of foreign currency and thus, increases demand for the precious metal.
In other precious metal trade, silver futures rose 0.22% to $16.36 a troy ounce, while platinum futures fell 2.04% to $967.50 an ounce.
Copper fell 0.14% to $3.128, while natural gas rose 0.94% to $2.70 as the Energy Information Agency said natural gas storage fell more than expected.
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