Gold and Silver Climb Ahead of Tuesday Tariffs

 

Gold and Silver Climb Ahead of Tuesday Tariffs

(Bullion News Network) – Gold and silver prices climbed today as markets prepare for fresh tariffs on Canadian and Mexican imports scheduled to go into effect tomorrow. Gold jumped nearly $36 per troy ounce in anticipation of the tariffs, which economists say could raise prices for consumers and would likely lead to retaliatory tariffs by affected countries. Silver also gained to start the week, jumping nearly $0.60/ozt and coming within 25 cents of $32 per troy ounce. The price action drove the gold-silver ratio down .42:1 to 91.12:1. Platinum group metals increased in value, with platinum and palladium gaining approximately $18 and $27 per troy ounce, respectively. 

President Trump suggested last week that the tariffs, including 25% fees on imports from both Canada and Mexico and an additional 10% tariff on China, will go into effect tomorrow on March 4th. This round of tariffs is part of the President’s larger objective to increase national revenue while bolstering the United States’ interests abroad, White House officials say. Last month, both Mexico and Canada negotiated a one-month reprieve from the aggressive economic action by committing more funding and a larger military presence on their shared borders with the United States. 

This afternoon, President Trump reiterated that there would be no last-minute negotiation this time around. Speaking to reporters, the U.S. leader said that there is “no room left for Mexico or Canada” to avoid the tariffs, and that the new policies are “all set” to “go into effect tomorrow.” Wall Street sank on the news, with the S&P 500 dropping over 1.75% and the Nasdaq losing 2.64% after President Trump spoke. During his speech, the leader also implied that several more tariff rounds are coming in the next few months, including a full slate of reciprocal tariffs and potentially a new 25% tariff on the European Union. The news comes on the heels of several signs that the U.S. economy may be cooling down, including last week’s troubling consumer confidence reading. 

Meanwhile, analysts say that the outlook for safe haven assets remains strong. CNN’s “Fear and Greed Index,” which measures which of the two key motivating emotions are driving investor decisions, ticked over to “extreme greed” this afternoon after President Trump confirmed that the slate of universal tariffs on imports from Canada and Mexico will go into effect tomorrow. Safe haven demand spiked today after the announcement, a sign typically associated with investor fear. Gold and silver are safe haven assets that tend to perform well during periods of uncertainty and instability. 

Economists don’t quite agree on how tariffs would impact American markets, but most studies find that high tariffs lead to heightened prices, particularly for imported goods for which the importing country has few local alternatives. Certain alcohols, foods, and vehicles are particularly susceptible to price increases in the case of a tariff-heavy policy approach, some economists say. Canada and Mexico are chief exporters of processed bullion into the United States, including both coins and bars. Within the precious metals sector, premiums for future releases of Canadian and Mexican silver and gold coins could increase as these imports become costlier. 

CME FedWatch projects a heightened probability of a federal interest rate cut following today’s news. The metric now anticipates a 9% chance that the Fed opts to cut rates by 25 basis-points at the FOMC’s March meeting, up from 8% one day ago and 4% last week. Traders should expect more insight into how the FOMC may vote after several key data reports scheduled for release later this week, including the jobs report and unemployment rate. Analysts expect an increase in nonfarm payrolls when the report is released Friday and the unemployment rate to remain unchanged. 

An unexpected drop in that jobs report or a bump in the unemployment rate could incentivize the FOMC to cut rates in March. Next Wednesday, the CPI, one of the Fed’s core inflation metrics, will become public.