(Feb 24): Gold climbed after a run of three weekly gains as heightened uncertainty over US trade policy unsettled markets and hurt the dollar.
Bullion rose as much as 1.9% to top US$5,200 an ounce. President Donald Trump said on Saturday he would impose a global tariff of 15% after the Supreme Court ruled against his use of emergency powers to levy duties. A weaker dollar made the metal cheaper for many buyers.
The Supreme Court decision could have implications for the US government deficit as tariff revenues come under threat, as well as the country’s trade balance. The 15% tariff rolled out by the White House is meant to replace those the court invalidated, though it’s only permitted to last up to 150 days and in cases of fundamental international payments problems.
Gold’s recent run of gains has helped the metal to recover ground following a sudden rout at the turn of the month, which had dragged prices down from a record. The advance has been underpinned by long-term factors aiding the commodity — including heightened geopolitical tensions and investor wariness of sovereign bonds and currencies.
“There are enough structural factors in favour of gold in the medium term,” said Vasu Menon, strategist at Oversea-Chinese Banking Corp. “In the short term, however, expect gold prices to be volatile after the sharp gains in recent months given still-unfolding developments with US trade policy, and the situation in Iran.”
See also: Gold pulls back after four-day ascent as traders take profits
The Supreme Court ruling has also cast doubt over deals the US has negotiated with major trading partners. The European Union is poised to freeze the ratification process of an agreement with Washington until there’s more clarity, Indian officials will postpone a trip to the US, while a member of Japan’s ruling party called the situation “a real mess.”
"Gold’s strength amid a lower positioning from hedge funds shows that there’s further position upside. The Commodity Futures Trading Commission data shows that the net-long position for gold futures have fallen to the lowest level in nearly a year," says Mark Cranfield, Markets Live strategist at Bloomberg Strategists
In the Middle East, traders are watching a standoff between Washington and Tehran. While the two nations are in talks over a potential deal over Iran’s nuclear programme, the US has amassed a vast military force in the region, prompting concern that there could be limited strikes or a full-blown conflict.
See also: Gold and silver seen as first-time investors’ preferred asset class: OCBC
Gold rose 1.8% to US$5,197.71 an ounce as of 10.39am in New York. The Bloomberg Dollar Spot Index dropped 0.08%. Silver climbed 3.2% to US$87.38. Platinum slipped while palladium traded higher.
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