Gold Drops as Investors Assess Tariff Impact on US Economy
Gold fell as investors study the latest developments around tariffs and their impact on the US economy and Federal Reserve decisions.
President Donald Trump exempted Mexican and Canadian goods covered by the North American trade agreement known as USMCA from his 25% tariffs, offering major reprieves to the US’s two largest trading partners.
Trump signed orders Thursday paring back the tariffs, which are related to illegal immigration and fentanyl tracking, until April 2. That is the date when the president is expected to start unveiling plans for so-called reciprocal duties on nations around the world as well as sector-specific duties.
The decision marks a significant reversal by Trump, who on Tuesday had announced the largest tariff increase in a century only to back down 48 hours later as stocks were hammered and Republicans expressed concern about the economic consequences.
A slew of tariff headlines in recent days have created large swings in equities and kept investors on edge. In the bond market, traders sold Treasuries amid mounting conviction that a trade-induced growth slowdown will lead the Fed to cut interest rates multiple times this year. Both lower borrowing costs and declining yields tend to benefit gold, as it doesn’t pay interest.
“It is the perfect environment for gold investing,” said Dina Ting, head of global index portfolio management at Franklin Templeton, in an interview. A potential flareup in inflation, a possible economic slowdown and ongoing geopolitical instability are “stoking volatility,” and gold serves as an insurance in periods of volatility, according to Ting.
Elsewhere, traders will be parsing nonfarm payrolls data on Friday for any further signs of a slowing labor market, which would boost the odds of more Fed rate cuts.
Spot gold fell 0.3% to $2,910.63 an ounce as of 4:51 p.m. in New York. The Bloomberg Dollar Spot Index was down 0.1% after falling for three days. Silver and palladium edged lower, while platinum headed higher.
Source: Bloomberg
