On Friday, gold registered solid gains after Trump made new tariff announcements targeting Canada, and the president also broadened his tariff threats on other countries the U.S. trades with. Gold futures made gains of 0.7 percent to reach $3,349 early on Friday while spot gold saw gains of 0.4 percent to reach $3,336 an ounce.
These gains came after President Trump announced on Thursday that America was levying a 35 percent tariff rate on all imports originating from Canada. Trump added that he intended to levy duties of between 15 percent and 20 percent on imports sourced from other countries that the U.S. trades with.
Earlier on Wednesday, the American president had revealed that the country would be imposing tariffs of 50 percent on all copper imported into the U.S. and that a similar rate would be imposed on imports originating from Brazil. The U.S. also dispatched tariff notifications to other countries that engage in trade with the U.S. All the latest tariff announcements come into force on August 1.
The tariff announcement targeting Canada gave upward momentum to the price of gold as the need for safe haven assets rose in light of this headwind to global trade. However, Tim Waterer, a market analyst at KCM trade, cautioned that this momentum in the price of gold may not be long-lasting if market players get a conviction that the tariffs could be reduced after trade negotiation between the trading partners.
Meanwhile, the dollar index was on course to record its best week since the end of February. This impressive performance is likely to have acted as a dampener on further potential gains that gold could have made since a strong dollar reduces the appeal of bullion to international buyers given that they pay more to convert their currencies into USD in order to acquire gold sold in dollars.
Furthermore, U.S. jobs data was surprisingly favorable, indicating that people filing for unemployment benefits were far fewer than had been anticipated. This data reduced the pressure on the U.S. Fed to make interest rate cuts sooner since the economy appeared to be doing well. As a result, gold’s appeal was somewhat dampened since the precious metal performs significantly better under low interest rate conditions.
All in all, the current state of the market for gold is positive and these conditions favorably position entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) that have gold-rich properties to attract additional investment and grow their operations.
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