Gold rises as traders weigh tariff risks and Middle East tension

The prospect of a near-term hold on U.S. interest rates may present headwinds for gold, which doesn’t pay interest. Photo by GEORG HOCHMUTH/APA/AFP via Getty Images

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Bullion climbed as much as 1.4 per cent on Wednesday, clawing back some of the losses from the previous session. A lack of clarity over U.S. trade policy has supported the metal in recent sessions, as well as tensions over an American military buildup ahead of the next round of nuclear talks with Iran this week. Silver rose above US$90 an ounce.

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Gold has found a footing above US$5,000 an ounce, having recovered more than half of the losses sustained during a historic two-day rout at the turn of the month.

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“It seems a breakout to the upside is in the making,” said Yuxuan Tang, head of macro strategy for Asia at JP Morgan Private Bank. Tariff uncertainty and Iran risk are among the factors that “may prove sufficient to catalyze a more sustained shift,” she said.

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In the U.S., President Donald Trump’s broad-based 10 per cent import levy came into effect Tuesday, after a Supreme Court ruling struck down his earlier reciprocal tariff regime. While he subsequently threatened to raise the levy to 15 per cent, he has not officially issued this directive.

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In a move that could open the door to additional tariffs, the Trump administration is also readying a spate of national security investigations into the impact of certain imports on items such as batteries and industrial chemicals. Meanwhile, some importers are seeking tariff refunds from the government.

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“It’s going to have dramatic implications for the U.S. budget deficit, the U.S. dollar and Treasuries,” said David Wilson, director of commodities strategy at BNP Paribas SA, referring to the potential refunds.

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Concerns about mounting sovereign debt have been a factor in the so-called debasement trade, whereby fears of inflation or dollar depreciation push investors toward hard assets like bullion. This was a major driver of gold’s multiyear bull run prior to the abrupt pullback at the end of January.

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Meanwhile, the prospect of a near-term hold on U.S. interest rates may present headwinds for gold, which doesn’t pay interest. Rates are likely to stay unchanged “for some time” as recent economic data shows an improvement in the American labour market, Fed Bank of Boston President Susan Collins said on Tuesday.

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Minutes from the Fed’s January policy meeting, published earlier this month, showed officials at the U.S. central bank appeared to be wary of cutting borrowing costs.

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Gold rose 0.9 per cent to US$5,188.22 an ounce as of 3:24 p.m. in New York. Silver climbed 3.9 per cent to US$90.56. Platinum advanced 6.3 per cent and palladium was up 1.2 per cent. The Bloomberg Dollar Spot Index, a gauge of the U.S. currency, was steady.

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Metals trading resumed on CME Group Inc. after a brief halt due to technical issues. Gold futures rose 0.7 per cent to US$5,214.70 while silver futures gained 3.9 per cent to US$91.58.

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—With assistance from Jack Ryan and Yvonne Yue Li.

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