Gold sets all-time high on trade war fears

Gold prices hit a record high Friday, topping US$2,800 an oz. amid growing concern that U.S. President Donald Trump will follow through with his threat to slap multiple nations with import tariffs.

Spot gold rose about 0.4% to US $2,808.38 per oz. in early afternoon trading, Trading Economics data show. That takes the metal’s advance to about 5.7% for the month and 37% over the last year.

Trump reiterated Thursday that he will likely impose tariffs on countries such as Canada, China and Mexico as soon as Saturday. Even so, the Wall Street Journal reported Friday that Trump advisors are looking for ways to avoid enacting across-the-board levies on Canada and Mexico, the U.S.’s two largest trading partners.

The increasing likelihood of a trade war is clearly boosting gold’s allure, said Ryan McIntyre, a managing partner at Sprott Inc.

“There seems to be a widening between countries rather than a coming together, and this is likely to continue for the medium term,” he said in a telephone interview from Darien, Connecticut.

Uncertainty

“When you have increasing levels of uncertainty, gold is the place to be – particularly now, where the risks are on the sovereign side instead of the corporate side. Gold is great because it’s completely independent of other assets and institutions. People are really looking for an asset that’s a store of value. One has to think the trust factor vis-a-vis institutions is lower now than it’s been for a while. So, I think gold will continue to do well.”

Gold exports from Switzerland to the U.S. surged almost 20-fold in December from a year earlier as traders tried to build physical positions on New York’s Comex commodities exchange to hedge against possible U.S. tariffs.

Swiss gold exports hit 64.2 tonnes in December, up from 3.3 tonnes a year earlier, official Swiss customs data show. That’s the highest monthly gold flow from Switzerland to the U.S. since March 2022, following the start of Russia’s war on Ukraine.

Inventory levels in Comex vaults have surged 75% to 926 tonnes, the most since August 2022, the Financial Times reported this week. Gold traders and financial institutions have moved 393 metric tonnes to the U.S. since the November U.S. election, the newspaper said.

Bullion shortage

The shipments have also created a shortage of bullion in London, according to the FT. The wait to pull bullion from the Bank of England’s vaults now stands at between four and eight weeks, up from a few days previously, the FT said, citing unidentified people familiar with the process.

The stockpiling of gold in the U.S. is a “precautionary move” that’s driven by concerns that potential tariffs could disrupt supply chains, according to Joe Cavatoni, a senior market strategist at the World Gold Council.

“While traders are reacting to the uncertainty, I’m cautiously optimistic that gold won’t be significantly impacted,” Cavatoni said in an emailed comment. “At this stage, the rhetoric from the Trump administration suggests that the focus of tariffs will be broad-based and has not suggested monetary metals like gold will be directly targeted.”

Traders “are trying to front-run any potential tariffs and effectively getting the gold over here first,” McIntyre said. “It can always be exported later and it doesn’t really cost much, so there’s very little friction. What people are saying is, let’s move all our gold to the United States now. If the tariff doesn’t happen, well, we can move it back and it’s really no big deal because logistics are pretty minor the other way.”

Comex

Higher prices on the Comex – compared with the cash market in London – are also driving the shift.

“As long as there is an arbitrage there, people will take advantage of it.” McIntyre said. “If the price of gold is higher in the United States than it is in London, it makes perfect sense for people to ship over. Other commodities are more complex in terms of moving around, so you don’t see that as much as it requires more cost and more time. But shipping gold is something you can do very easily from a logistics and cost standpoint, and the markets very liquid. So it kind of adds everything for arbitrage, which people are obviously exploiting now.”