Trump tariffs may help lift gold prices amid rising safe haven demand, RBC says
Investing.com - U.S. President Donald Trump's move to slap tariffs on some of America's closest trading partners this week would ultimately be positive for gold prices, according to analysts at RBC Capital Markets.
Last weekend, Trump unveiled 25% import tariffs on Canada and Mexico, as well as a 10% levy of China, arguing that they were in response to these countries' perceived roles in the flow of illicit drugs and illegal immigration into the U.S.
But, with hours before they were due to take effect on Tuesday, Trump announced a delay to the tariffs on Mexico and Canada after speaking with the leaders of both nations. Only the duty on China was brought into force, sparking a bout of retaliatory tariffs from Beijing and fuelling new worries over a renewed Sino-American trade war.
Specifically, China’s finance ministry said it will impose a 15% tariff on coal and liquified natural gas imports from the U.S., and an additional 10% duty on crude oil , agricultural equipment and automobiles from February 10.
China’s commerce ministry also placed export controls on rare earths and exotic materials, of which the country is a top producer. The materials covered included tungsten, tellurium, ruthhenium, and molybdenum.
Separately, Beijing added Calvin Klein-owner PVH Corp (NYSE: PVH ) and biotechnology firm Illumina (NASDAQ: ILMN ) to its list of unreliable entities, and initiated an antitrust investigation into Alphabet-owned Google (NASDAQ: GOOGL ).
Spot gold prices rose slightly in the wake of the announcement of China's tit-for-tat tariffs and were within sight of a recent peak, as safe haven demand for the yellow metal was underpinned by concerns over the implications of the trade tensions.
In a note to clients, the analysts at RBC Capital Markets argued that an extended period of tariffs could lead to higher inflation and slower global growth, echoing recent warnings from many economists and investors. Such trends could further bolster gold prices, they predicted.
However, they noted that, in the immediate term, prices of the metal could experience some volatility as traders assess a range of factors, including the negative impact of a stronger dollar and lower individual purchasing power due to the anticipated acceleration in inflation.
"Beyond the direct impact on gold flows from tariffs, we think the more interesting and enduring story here is around what it means for gold appetite as both a risk overlay and a perceived safe haven," the analysts said.
"The tariffs news and wave of executive orders and actions in the first days of the Trump administration represent the type of uncertainty that we think could support gold going forward."