Gold Strengthens, US Tariffs and Middle East Tensions Boost Safe Haven Demand
Gold prices rose on Wednesday (February 25th), while silver surged sharply, as market participants weighed uncertainty over US import tariffs and escalating geopolitical friction in the Middle East. Gold briefly strengthened by around 1.4%, paring some of the previous session's losses, supported by the lack of clarity on US trade policy and rising tensions ahead of a new round of US-Iran nuclear talks this week. Silver has re-entered the $90/oz mark.
Gold is also seen as having regained ground above $5,000/oz, after recovering more than half of the losses from a sharp two-day correction at the beginning of the month. Several market participants believe there is still room for strengthening. JP Morgan Private Bank said the current conditions have the potential to trigger an upward "breakout," as the combination of tariff uncertainty and Iran risks could drive a more sustainable shift in demand.
On the trade policy front, US President Donald Trump's 10% across-the-board import tariffs took effect on Tuesday, following a Supreme Court ruling that overturned the previous "reciprocal" tariff regime. Trump has threatened to raise tariffs to 15%, but has yet to issue official directives for such an increase. The US government is also preparing a series of national security investigations into the impact of imports of several commodities, such as batteries and industrial chemicals—a move that could potentially open the door to additional tariffs.
Meanwhile, some importers have begun requesting tariff refunds from the government. BNP Paribas assesses that potential refunds could have a significant impact on the US budget deficit, the dollar, and the Treasury bond market. Amid concerns about the government's rising debt burden, the "debasement trade" narrative has regained ground—where concerns about inflation or a weakening dollar encourage investors to shift portfolios to hard assets like gold.
However, the outlook for US interest rates remains a balancing factor. Gold could face headwinds if the Fed holds rates on hold for longer, as the precious metal offers no yield. Boston Fed President Susan Collins stated that interest rates are likely to remain unchanged "for some time" after recent data showed an improving US labor market. The minutes of the Fed's January policy meeting also indicated that officials remain cautious about cutting borrowing costs.
In New York trading, gold rose 0.9% to $5,188.22/oz, while silver jumped 3.9% to $90.56/oz. Platinum jumped 6.3%, and palladium gained 1.2%. The Bloomberg spot dollar index remained stable. Metals trading on the CME was temporarily suspended due to technical issues, but has since resumed; gold futures rose 0.7% to $5,214.70, while silver futures gained 3.9% to $91.58.
Source: Newsmaker.id
