Gold prices took a significant hit alongside a sharp decline in silver prices as US President Trump unveiled extensive trade tariffs. The announcement, which exempted ‘bullion,’ led to a notable convergence in price differentials between New York Comex futures and London bullion markets.
During early Asian trading, gold soared to a new record high of $3167 per Troy ounce, marking its 21st record of the year. However, this surge was short-lived as the price plummeted by 3.1% to $3090 for London settlement, erasing gains made earlier in the week.
Meanwhile, silver prices experienced a 6.8% drop, breaching the $32 per Troy ounce mark for the first time in nearly a month before rebounding slightly to $32.15. This decline occurred despite the US Dollar’s 2.0% plunge against other major currencies.
Silver, known for its substantial industrial demand, faced pressure as trade policy uncertainties loomed. Analysts highlighted the oversupply of precious metals in New York warehouses, attributing it to weak local demand and the unlikely imposition of direct tariffs on precious metals.
Comex-approved warehouses now hold an excess of four years’ worth of total US gold demand and a surplus of four years’ worth of US industrial silver demand, indicating a saturated market in the US compared to tighter conditions in the UK and Europe.
The exemption of bullion from tariffs, along with the maintenance of exemptions for Mexico and Canada, provided some relief to the markets. However, global stock markets still dipped, with significant impacts on export-heavy bourses in Tokyo, Frankfurt, and Paris.
China, a key player in the trade tensions, saw its currency depreciate against the Dollar, boosting gold prices in Shanghai to a new high. This surge in gold prices contrasted with declines in London gold prices, which fell to £2330 per Troy ounce and €2748, respectively.
Furthermore, the Gold-Silver Ratio hit a 2.5-year high above 96 based on London benchmark prices, signaling a stark contrast in the performance of the two precious metals. The market dynamics underscored the intricate interplay between geopolitical events and precious metal prices.
In conclusion, the exemption of bullion from trade tariffs had a profound impact on the precious metals market, leading to divergent price movements in gold and silver. The evolving trade landscape continues to shape investor sentiment and market dynamics, underscoring the need for vigilance and adaptability in the face of geopolitical uncertainties.