(Bloomberg) — Gold edged lower after President Donald Trump imposed tariffs on imports from Canada, Mexico and China, with a surging dollar outweighing haven demand as the world braces for trade wars.
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Bullion traded near $2,790 an ounce, but remained close to a record high reached Friday, while a US currency gauge rose as much 1%. The inflationary impact of tariffs between the world’s biggest economies may keep borrowing costs elevated, a headwind for gold that doesn’t offer any interest, while a rising dollar makes it pricier for many buyers.
The US announced tariffs of 25% on goods from Canada and Mexico, and 10% on those from China, set to take effect Tuesday. Canadian energy imports will face a 10% levy. Ottawa unveiled a 25% counter-tariff on US goods, Mexico pledged retaliatory actions and Beijing issued a statement vowing “corresponding countermeasures.” Trump has also threatened tariffs against the European Union, which said it would respond firmly.
A global trade war would be a major headwind for growth, would force a reorganization of global supply chains, and threatens to roil financial markets across the world. While gold would typically benefit from haven demand in such a scenario, moves in the dollar and the interest-rate outlook are offsetting those pressures. Some of the impact may already be priced in, with the precious metal rising 6% so far this year, touching a record high on Friday, following a 27% rally in 2024.
The Federal Reserve has “kind of got a ‘watch-and-see’ mantra, and really therefore I wouldn’t be trading gold on a potential Fed reaction,” said Chris Weston, head of research at Pepperstone Group Ltd.. “Gold right now is more of a play against deteriorating trade policy and higher friction coming through.”
Spot gold declined 0.2% to $$2,794.30 an ounce as of 8:03 a.m. in Singapore, after climbing 1% last week. The Bloomberg Dollar Spot Index rose 0.9%, after advancing 1% last week. Silver, platinum and palladium all dropped.
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