(Bloomberg) — Gold dropped as the dollar pushed higher after President Donald Trump said 25% tariffs on Canada and Mexico are on track to go into place on March 4.
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Trump also said he would impose an additional 10% tax on Chinese imports, moves that would deepen his fight with the nation’s largest trading partners. Bullion fell by as much as 1.7% as the US currency moved higher. A stronger greenback makes the precious metal less appealing for foreign investors as it’s denominated in the dollar.
Gold is on course for its first weekly decline since the end of December. Investors booked profits from a blistering rally that saw the metal gain more than 9% this year, with prices breaking record highs.
Gold’s recent run has been broadly supported by haven demand amid concern and confusion over Trump’s plans for sweeping tariffs.
Worries that gold could be included in Trump’s tariffs on imported goods saw New York’s Comex gold futures surge above their international benchmarks in recent months, sparking a global rush among traders and dealers to ship bullion to the US to capture the large premium.
That dash has caused tightness in the physical market, with one-month lease rate for bullion jumping to as high as about 5%, far above the usual level of close to zero. The rate reflects the return that holders of bullion in London’s vaults can get by loaning their metal out on a short-term basis. It eased to below 0.5% on Thursday. Meanwhile, the price spread between Comex gold and spot gold in London has also narrowed.
Trump’s comments on the timing, size and targets of his tariffs have frequently confounded global markets, while his geopolitical moves have also underscored bullion’s role as a store of value in uncertain times. Additionally, new research suggests the president’s planned levies on imports from China may hit the American economy more than official US trade data indicates.
Looking ahead, investors will be analyzing the Federal Reserve’s preferred inflation gauge on Friday for more clues about monetary policy. Treasury investors anticipate the central bank will shift its focus from inflation to growth.
Spot gold declined 1.3% to close at $2,877.52 an ounce at 5 p.m. in New York. The Bloomberg Dollar Spot Index was up 0.6%. Silver, platinum and palladium all slipped.
