Gold surpasses $2,900 per ounce

10 February 2025

Gold surpasses $2,900 per ounce amidst multi-front trade war escalation

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold surpassed $2,900 per ounce for the first time in history and had resumed its gains today since the beginning of this week’s trading.

Gold’s gains come as more chapters of the trade war unfold with Donald Trump talking about his intention to impose more tariffs, including on all steel and aluminum imports.

Over the weekend, Trump said he was planning to impose a 25% tariff on imports of these metals, in addition to imposing retaliatory tariffs for these on US imports. The US imports a quarter of its steel needs and half of its aluminum, with Canada supplying 79%. The US also has the capacity of only 1.73% of the global smelting industry for this metal.

This comes after the beginning of the imposition of trade tariffs on imports from China, which necessitated countermeasures from the latter, including restrictions on exports of some metals and retaliatory tariffs, and what seems more important is targeting American companies.

According to The Wall Street Journal, Chinese officials are working on preparing a list of American technology companies that could be targeted in antitrust investigations and other means, in an effort to use the influence of the CEOs of those companies Trump’s trade decisions. Among the potential companies are Apple, Broadcom, and Synopsys, which are in addition to the investigations that have previously been revealed with Nvidia and Google.

What we have seen from the beginning of Trump’s trade escalation may only be the beginning of a wider war, which could expand to include the European Union and South Korea. Trump’s steps will also be met with countermeasures from the targeted countries, which in turn could drag Trump into an even broader escalation than before.

This war will include so far the markets for commodities, energy, technology, and consumer goods, and the more it expands, the deeper the uncertainty about the direction of the global economy amid this reality, which could change the world’s trade map and redraw alliances between countries other than the US with each other.

In another context, far from the trade war, and also during the holiday, Trump stated that the United States’ debt is exaggerated and that some of it is “fraudulent.” This, according to Reuters, will revive concerns about an idea that Trump had previously raised regarding the US reneging on its debt. This idea would have disastrous consequences, and therefore Trump may not implement his idea, according to Reuters, which also said that merely waving it would cause turmoil. It also adds to Trump’s repeated statements about his efforts to interfere in the Federal Reserve’s policy, which could raise concerns about confidence in the system.

In any case, we must see what Trump will do, not what he says. So far, he has not taken any real steps to implement either of the previous two ideas, which would have catastrophic consequences.

As for economic data, gold was able to rise slightly on Friday after a series of key US labor market data for that day. While the data has been mixed, with fewer jobs added than expected at 143,000, The Journal Editorial Board argues in an opinion piece that the jobs numbers, low unemployment and wage growth reflect a healthy labor market and business confidence in Trump.

In addition, these figures, along with previous and renewed upward risk of inflation, appear to be reducing the chances of the Fed cutting interest rates. Investors are now divided in their expectations for the pace of rate cuts in the second half of this year, with the probability that the Fed will keep the current range at just above 50%, up from 40% a week ago.

Despite these tightening outlooks, gold continues to hit new all-time highs, and the high uncertainty should justify increased positioning in the non-yielding precious metal.

 

Zaid Barem / YMM