Trade wars drive gold’s need for safety, yet dollar firmness caps the surge

• U.S. tariffs on Canada and threats to other nations spur demand for safe-haven assets.
• A stronger U.S. dollar limits gold’s upside despite geopolitical risks.
• New levies on Canada at 35%, with broader 15-20% tariffs on most trading partners.
• Analysts note investors are growing accustomed to Trump’s aggressive trade policies.
• Global economic uncertainty drives demand for gold, as nations like China diversify away from U.S. Treasuries.

Gold prices surged on Friday as U.S. President Donald Trump escalated trade tensions with new tariffs on Canadian imports and threats against other trading partners, but gains remained capped by a resurgent dollar. Spot gold climbed 0.3% to $3,332.73 per ounce amid geopolitical instability, while futures rose 0.53, $343.70. Analysts highlighted how Trump’s “tariff wars” have become a feature of global markets, tempering gold’s rebound. The run-up follows weeks of heated trade rhetoric, with tariffs on copper, Brazil, and now Canada signaling a prolonged era of economic uncertainty. Meanwhile, a stronger dollar—on track for its best weekly performance since February—dampened interest from international buyers. The dual forces underscore the fragile balance between gold’s role as a haven and the interplay of Federal Reserve policies, employment data and global monetary shifts.

Trade tensions drive safe-haven rush

Trump’s latest tariffs, including a 35% levy on Canadian imports and proposed 15-20% duties on most nations, reignited safe-haven demand for gold. The announcement caps a week of heightened volatility, starting with a 50% copper tariff and threats against South Korea and Japan. Despite Friday’s gains, gold’s 0.3% rise lagged expectations. Analyst Tim Waterer of KCM Trade noted, “Investors are becoming more accustomed to the tariff story and Trump’s policy-making style,” limiting outsized moves.

Silver and platinum also saw modest gains, with palladium climbing 0.1%, though the broader precious metals complex remains vulnerable to supply-chain disruptions from tariffs and inflationary pressures. Separately, State Street Global Advisors’ Aakash Doshi observed that gold’s “uncertainty premium” remains in play. “The range for the third quarter is between $3,100 and $3,500,” he said, pointing to consolidation after a strong first half.

Dollar’s heating up caps gold’s rally

A firmer U.S. dollar—bolstered by stable U.S. employment data—offset some of gold’s safe-haven appeal. Weekly jobless claims fell to a seven-week low, easing immediate fears of Federal Reserve rate cuts and underpinning the greenback. The dollar’s rise makes gold costlier for non-U.S. buyers, complicating the narrative for traders eyeing the metal as a hedge against inflation. Common Wealth Bank economist Joseph Capurso warned that navigating Trump’s “byzantine” tariff framework could prove gridlocked, with further levies likely by August 1.

Global economic uncertainty fuels policy shifts

The tariff escalation underscores deeper fractures in global trade, as nations reconsider U.S. dollar dependency. China’s shift toward gold reserves, mentioned in earlier commentaries, reflects broader distrust in U.S. financial stability. Meanwhile, the Fed’s wait-and-see approach on rates complicates monetary strategies. Gold’s allure lies in its historical role as an inflation hedge and geopolitical stabilizer, thriving when interest rates are low and currencies falter.

However, Trump’s goal to “reassert dollar hegemony” while reviving gold-backed policies faces steep hurdles, including reducing sanctions and State Department budgets. Analysts, such as Jens Pedersen, caution that without structural fiscal reforms, gold’s current uptick may remain a tactical rally rather than a sustained boom.

A new era of uncertainty for investors and policymakers

Gold’s Friday gains reflect its enduring role as a refuge in turbulent markets, yet the metal’s trajectory hinges on unresolved trade conflicts and dollar dynamics. As Trump’s tariffs reshape global commerce and central banks recalibrate policies, investors face a dual challenge: navigating transient market noise while preparing for longer-term shifts in monetary architecture. With August 1 tariffs looming and Fed decisions pending, the coming weeks may define whether gold’s rally holds—or if the dollar’s resurgence reigns supreme.

Sources for this article include:

MSN.com

CNBC.com

Reuters.com