The gold price stabilised Tuesday after Donald Trump, the US president-elect, threatened to increase tariffs on imported products.
Prices of yellow metal fell on Monday, as a possible ceasefire between Israel and Hamas in their conflict curtailed the flow of safe havens.
The February gold contract is currently $2,657.01 an ounce. This is up 0.6% compared to the previous close.
Trump threatens to impose more tariffs
Gold recovered from previous losses as Trump threatened to impose trade tariffs of 25% on Mexico and Canada and an additional 10% on top of the 60% already proposed for China.
Trump stated that he will implement tariffs until Mexico and Canada tighten their border with the United States and crack down on illegal immigration.
Mexican cartels produce the drug in huge quantities and smuggle them to the US.
According to a Fxstreet article, Trump also said that China should do more to stop the illegal supply to cartels of “precursor chemical” used in the manufacturing process.
Trump’s threats raised fears of a full-blown trade war between China and the US. On Tuesday, this boosted safe-haven flows into yellow metal.
Investors also reduced their appetite for risk due to the possibility that Beijing could retaliate with its own tariffs.
The dollar surged following Trump’s remarks, but gains were modest. The greenback will benefit from higher tariffs and fewer imports.
A stronger dollar increases the price of commodities in greenbacks for buyers overseas, thus reducing demand.
Ceasefire agreement weighs on inflows of safe havens
The COMEX gold price fell by almost $3 an ounce Monday, as news of a possible Middle East ceasefire boosted risk-on sentiments.
In a note, Joaquin Monfort of Fxstreet.com stated that if implemented, the Israeli army would gradually withdraw its ground forces in Lebanon in exchange for Hezbollah removing its militias from a region near the border between northern Israel and Lebanon.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said:
The sharp decline in gold prices yesterday demonstrated that the metal is not immune from these changes once geopolitical tensions subside.
According to CME FedWatch, traders have priced a 59.6% chance that the US Federal Reserve will cut rates by 25 basis point at its December meeting.
Investors had placed bets as high as 85% two weeks ago. However, the resilient US economy has caused them to lower their expectations for a rate reduction next month.
The supply deficit on the platinum market will persist
According to the World Platinum Investment Council’s quarterly report, it expects that there will be a deficit in supply of 539.000 ounces by 2025.
The automotive industry’s demand is expected to increase by 2%, reaching a seven-year high.
Demand for jewellery and investments is expected to grow.
Other industrial demand, on the other hand, is forecast to drop by 9%, to a five-year low. This means that overall demand will likely fall by 1%, year-on-year, to 7.863 millions ounces.
The supply is expected to increase by 1%, to 7.324 millions ounces. A decline in mine production will be more than offset by an increase in recycling.
Platinum is currently trading at $933 an ounce, a level below that of the start of the year.
Fritsch added:
Platinum is expected to reach USD 1,100 an ounce by the end of the year.
This post Gold stabilizes as Trump threatens more tariffs, platinum supply deficit could persist may be updated as new information becomes available
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