The gold market was thrown into chaos on Friday after Donald Trump introduced a dovish new Federal Reserve governor and a range of new tariffs, including hefty duties on kilo gold bars from Switzerland.
The precious metal increased by more than one per cent across Wednesday and Thursday – pushing the spot price above $3,400 per troy ounce – following the confirmation of the central banking selection and trade barriers, as reported by .
Earlier this week, Trump revealed Stephen Mirran, chair of the Council of Economic Advisers, as the latest Federal Reserve policymaker, in a move to strengthen support for quicker interest rate cuts at the Fed.
The White House also confirmed the final tariff rates that countries unable to secure a bilateral trade deal with the US will have to pay to export goods to the country, following the end of the extended negotiation window set by the President.
Is gold still a safe haven asset?
Both developments drove the gold price higher, as investors factored in the increased likelihood of another round of inflation.
These moves were further exacerbated by Trump's decision not to exempt one-kilo and 100-ounce gold bars in its contentious trade deal with Switzerland.
This decision has the potential to disrupt global trade in gold bars, which primarily flow between the US, London and Switzerland. The industry had assumed that gold would be exempt from the recently confirmed 39 per cent levy on Swiss exports to the US, given the yellow metal had been excluded in previous tariff rounds.
However, late on Thursday, America's Customs Border Protection Agency confirmed to the Financial Times that the new import levies would encompass gold.
The announcement triggered chaos in the gold futures market and created substantial price disparities between New York and London trading.
Gold prices in New York and London typically move in tandem.
Yet concerns that the new tariffs could create a supply shortage in the US saw gold futures on the New York market rocket to an unprecedented peak of $3,534/oz before retreating slightly.
This surge created a record $125/oz gap with London's spot price, which traded as low as $3,396.
Neil Wilson, º£½ÇÊÓƵ investor strategist at Saxo Markets, commented: "Gold is up to some funny business with the US apparently slapping tariffs on one-kilo bars, which has seen New York futures surge. Rather like what happened to the copper market it's unbalanced the usual internal structure of the physical vs futures markets."
"The NY market is used by bullion banks as a hedging tool, so we're seeing shorts intended as hedges get blown up. For now the London spot price is the most reliable gauge of price."
