The prices of gold firmed on Tuesday after U.S. President Donald Trump announced tariffs on Argentina, Brazil, and France.
U.S. gold futures rallied to a fresh one-week high to $1476, a level that previously contained it in late November. Spot gold was last seen trading at $1470.
Yesterday, Trump said he would impose tariffs on American imports of aluminum and steel imports from Argentina and Brazil with immediate effect. This move opened a new front in Trump’s trade war. He accused the two Latin American countries of intentionally devaluing their currencies to the detriment of America’s farm exports. The Trump administration has also proposed retaliatory tariffs against French imports. Further, the US government announced a 100% tariff on $2.4 billion worth of imports from France.
According to Mumbai-based Anand Rathi Shares & Stock Brokers’ commodity analyst Jigar Trivedi, Trump’s Latam tariffs failed to push gold prices up because of the weak demand for the yellow metal. In addition, the flow of the bullion into gold exchange-traded funds have been reduced. However, prices have gained upward momentum in early trading today.
The holdings of SPDR Gold Trust, the largest gold-backed ETF in the world, dropped by 0.7% yesterday to 889.16 tons. This is the SPDR’s lowest inventory level since September 9. Also, gold market speculators have lowered their bullish stance in COMEX gold for the week which ended on November 26.
Trivedi also said the current trade and economic situations do not favor the precious metal. He explained that the market is expecting a de-escalation of the U.S.-China trade war with the ongoing negotiations for the first phase of the agreement. The U.S. Federal Reserve has also indicated that no further interest rate cut will be implemented in 2019 unless there is a major economic slowdown.
Meanwhile, in relation to the protests in Hong Kong, Trump admitted that the U.S. Senate’s passage of legislation in support of the protesters caused a little complication in the trade negotiations. But he is confident that China is willing to have a deal.
On the price outlook of gold, MKS PAMP analysts noted that the bullion appears to be well supported at the $1,450 level. But he doesn’t expect much improvement before year end because of a lack of any meaningful demand.