(Bloomberg) -- Gold edged higher after US President Donald Trump announced he would likely impose tariffs on Mexico and Canada early next month, even as he held off from immediately hitting China with import levies.
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Bullion added to a modest gain on Monday to trade near $2,720 an ounce, as traders weighed the potential implications of US tariffs of as much as 25% against its neighbors. If enacted, the move threatens to spark a trade war among the nations.
Trump also indicated he was still considering a universal tariff on all foreign imports to the US, but said he was “not ready for that yet.”
Silver futures briefly spiked after Trump’s comments, with prices on contracts for delivery in March surging as much as 0.8% to $31.375 an ounce before easing. Mexico is the top miner of silver, and it is unclear whether the tariffs would apply to imports of the metal.
Nevertheless, the possibility of both silver and gold being caught up in the sweeping tariff measures has whipsawed the market in recent weeks, driving premiums for futures deliverable in New York to elevated levels as traders bought out of their short positions.
Investors were also weighing the outlook for inflation, with Trump’s domestic agenda of tax cuts and increased spending potentially pointing to ongoing price pressures this year. That may limit the Federal Reserve’s ability to keep easing monetary policy. Higher borrowing costs typically pose a headwind for bullion, as it does not pay interest.
Gold set a series of records in 2024, with gains driven by the Fed’s pivot to looser monetary policy, geopolitical tensions, and central-bank buying. The precious metal may yet receive a further boost from demand for haven assets amid concerns about the new president’s immigration policy, as well as scope for increasingly fraught US relations with other nations.
Elsewhere, traders were monitoring the impact of a long-delayed ceasefire deal in the Gaza war as Hamas released three female hostages in exchange for 90 Palestinians held in Israeli prisons.
Spot gold was up 0.4% to $2,718.81 an ounce at 9:58 a.m. in Singapore, after edging 0.2% higher on Monday. The Bloomberg Dollar Spot Index rose 0.4%. Silver, platinum and palladium all declined.