As the demand for safe havens remains strong due to the prospect of increased U.S. trade tariffs, gold prices saw a slight increase in Asian trade on Wednesday. The rise in gold prices was limited by the resilience in the U.S. market and easing tensions in the Middle East.
Gold rose 0.3% to $2,40.16 an ounce, while gold futures expiring in February rose 0.7% to $2,665.41 an ounce by 23:38 ET (04:38 GMT).
Trump Threatens More Trade Tariffs
U.S. President-elect Donald Trump’s threats to impose additional trade tariffs on China, Canada, and Mexico have raised concerns over a potential trade war. Analysts warn that steep tariffs could negatively impact global economic growth and lead to increased U.S. inflation, potentially affecting long-term interest rates.
The dollar strengthened on these concerns, limiting the overall gains in gold. Additionally, the announcement of a ceasefire between Israel and Hezbollah by U.S. President Joe Biden has reduced safe haven demand for gold.
Other precious metals also saw marginal gains, with silver rising 0.4% to $30.962 an ounce and platinum edging higher to $932.05 an ounce. Among industrial metals, benchmark copper on the London Metal Exchange rose 0.6% to $9,026.50 a ton, while zinc futures expiring in February rose 0.4% to $4.1463 a pound.
Trump Policies to Limit Gold Appetite- BofA
Bank of America analysts warn that Trump’s economic policies, expected to boost U.S. growth and strengthen the dollar, could limit investor appetite for gold. The anticipation of more corporate tax cuts and expansionary policies in Trump’s second term may support growth but also lead to higher inflation.
This trend is likely to keep U.S. interest rates relatively high in the long term, bolstering the dollar and Treasury yields while curbing demand for gold. Precious metals, especially gold, have been facing losses since Trump’s election victory in November.
The prospect of increased U.S. hawkishness towards China, a major importer of copper and other base metals, has also put pressure on industrial metal prices.
Analysis:
The threat of increased trade tariffs by the U.S. and geopolitical developments in the Middle East have influenced gold prices. As Trump’s policies are expected to strengthen the dollar and push up inflation, investor appetite for gold may be limited. This could lead to higher interest rates in the U.S. in the long term, impacting the demand for gold and other precious metals. Industrial metal prices are also affected by the U.S.’s stance towards China. Investors should monitor these factors to make informed decisions about their finances.