Global Gold Market Turbulence
The global gold market was thrown into fresh turbulence after a US government agency announced that bullion would not be freed from the tariffs. Imports of one kilo and 100 ounces of gold are subject to mutual tariffs based on a customs and border guards checked by CNN on July 31.
Tariff Implications
A tariff for gold would hike the cost of importing the metal into the USA and throw an expensive wrench into a global supply chain that flows between hubs in London, New York, and cities in Switzerland. The White House on Friday afternoon described potential tariffs on gold "misinformation" and said it would clarify the problem.
Market Reaction
The gold prices in New York, which had increased by 1%, ensured only 0.2% by Friday afternoon. Gold, a safe port during uncertainty, rose by 31% this year because investors were looking for places to park their money in the middle of trade and geopolitical turbulence. A tariff could increase the gold price, but would burden the supply chains on which the global market is based.
Supply Chain Concerns
Gold bullion is used to support the financial contracts traded on the COM Exchange, a hub for trading in New York. These gold bars are widespread from Switzerland. A new tariff for gold imports would be an additional factor for Wall Street dealers when buying or selling gold to stock exchanges in the USA. Futures contracts on US raw material exchanges Comex are often used to secure positions, with the assumption that retailers can easily import gold into the USA in order to take contracts into account if necessary.
Industry Impact
The increase in gold prices in New York held around 1% before retreat, which was not an enormous profit for the yellow metal. It was a signal that some dealers expected the tariff decision to be revised. The market is waiting for more clarity, and there are significant questions about what was really intended. A gold tariff could distort the market and make the New York stock exchanges less attractive for the global market.
Global Trade Concerns
The US bank said that the tariff for gold imports would disturb the current organization of global gold trade. The New York market could lose its attractiveness for global investors if they have to expect the costs for tariffs. It’s not just a concern for Wall Street, as there are gold in all shapes and sizes: from coins and jewelry to bullion used for financial contracts, to physical bars that are sold at Costco. The decision could have a significant impact on the global supply chain.
Industry Response
We are particularly concerned about the effects of tariffs on the gold industry and the physical gold exchange in the USA, a long-time and historical partner for Switzerland. The tariff adds this process to the costs, and since the majority of the refiner capacity is in Switzerland and 39% US tariffs are exposed, these costs would be quite high. There is still a lot of uncertainty in all of this, and until there is clarity, we expect the gold market and the precious metal markets to remain more nervous.
