(Bloomberg) -- Gold climbed — regaining a small foothold above $2,900 an ounce — as traders sought safety in bullion, with President Donald Trump’s latest tariff announcement intensifying concern that a global trade war could risk tilting the US economy into a recession.
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Trump said he was increasing the steel and aluminum tariff on Canadian goods to 50% to retaliate against Ontario’s move to place a levy on electricity sent to the US, ramping up his fight with the US’s largest trading partner. US equities pushed lower and the dollar fell, helping lift bullion as much as 1.2% higher.
Tariff headlines in recent weeks have created large swings in equities and kept investors on edge. A slew of tepid economic reports in the US have also sparked fears of stagflation, where there’s upside risk for inflation as well as downside risk for economic growth. Altogether, traders were increasingly convinced that a trade-induced growth slowdown will lead the Federal Reserve to cut interest rates multiple times this year.
“That’s going to be a tailwind for gold,” said Stephen Jury, global commodity strategist at JPMorgan Private Bank, in an interview. Increasing talk of the possibility of a recession in the US will likely lead to an environment where rates and the dollar may head lower, according to Jury. “That’s going to set up a very constructive scenario for a higher gold price in the second half of this year.”
Jury sees any dip in gold prices a buying opportunity for investors to diversify from a traditional mix of stocks and bonds.
Former Treasury Secretary Lawrence Summers said Tuesday there’s almost a 50-50 likelihood of the US tipping into a recession this year due to a range of policy steps from the Trump administration that are undermining confidence.
Gold has advanced 11% this year, hitting successive records. The rally has been driven by fears about the disruption caused by the Trump administration, central-bank buying and speculation the Fed may cut interest rates further. Lower borrowing costs tend to benefit non-yielding gold.
Spot gold gained 0.9% at $2,916.17 an ounce at 12:16 p.m. in New York. The Bloomberg Dollar Spot Index slid 0.3%. Silver, palladium and platinum all advanced.
--With assistance from Jack Ryan, Sybilla Gross and Preeti Soni.