Trump’s Anticipated Tariffs Spark Gold and Silver Prices in New York
With rising trade tensions and anticipation of policies by U.S. President-elect Donald Trump,
gold and silver markets have experienced significant volatility, drawing investor attention.
The notable surge in precious metals futures reflects traders’ expectations of the potential impact of proposed tariffs on global markets.
Content Overview
- Significant Rise in Gold and Silver Futures
- Interplay Between New York and London Exchanges and Its Impact on Prices
- Potential Scenarios and Lessons from the Past
- Inventory Stability and Supply Recovery
Significant Rise in Gold and Silver Futures
Gold and silver prices in New York witnessed a remarkable increase,
with gold futures exceeding London spot prices by $60 per ounce,
or 2%. Similarly, silver futures rose by over $1 per ounce, representing a 3% gain.
This surge is attributed to traders covering short positions in response to the potential inclusion of precious metals in the comprehensive tariff measures proposed by President-elect Donald Trump.
Interplay Between New York and London Exchanges and Its Impact on Prices
Prices between New York and London exchanges are typically aligned through the “Exchange for Physical” (EFP) mechanism,
which many banks and traders use to balance the two markets.
However, an unexpected premium in New York prices indicates traders’ concerns over the possible effects of tariffs on precious metal imports, such as gold, silver, and copper.
Nicky Shiels, Head of Metals Strategy at MKS Pamp, explained that these price movements are driven by banks
and investment funds covering their short positions.
Potential Scenarios and Lessons from the Past
John Reade, Chief Market Strategist at the World Gold Council,
noted that the likelihood of tariffs impacting metal imports justifies covering short positions.
He added that the potential cost of inaction could result in losses of up to $300 per ounce if a 10% tariff is imposed.
Despite this, the current situation does not indicate logistical issues in moving bullion between New York and London,
unlike during the early stages of the COVID-19 pandemic when price differences reached a record $70 per ounce.
Inventory Stability and Supply Recovery
With a stockpile of 8.1 million ounces on the COMEX exchange, supply stability is evident compared to previous years.
Traders have successfully overcome past supply chain disruptions that affected global markets.
In the latest trading, spot gold prices rose by 0.8% to $2,716.14 per ounce,
marking a significant gain after a 1.3% increase the day before.
Trump’s Anticipated Tariffs Spark Gold and Silver Prices in New York