Gold surges 2% early Wednesday, extending Tuesday’s rebound, as U.S. President Donald Trump’s new round of tariffs on imported goods from China kick in and the dollar weakened, making gold a more attractive alternate investment.
Investors also sought haven assets as cover for fears of a possible recession stemming from a trade war. A broader market meltdown saw gold lose more than 6% at the end of last week before the yellow metal rebounded Monday and Tuesday.
Investors were awaiting the next U.S. inflation report – the consumer price index – on Thursday for further direction on the state of the economy and the Federal Reserve’s next moves on monetary policy. Traders have shifted expectations of a Fed rate cut to May from June or July amid an increasing number of economists’ forecasts that the tariffs and retaliatory actions could trigger a trade war that would put the global economy into recession.
June gold futures rose 0.6% Tuesday to settle at $2,990.20 an ounce on Comex, though the most-active contract lost 1.5% in the first two days of the week. Bullion gained 11% in March after rising 0.5% in February and adding 7.3% in January. It rallied more than $500, or 19%, in in the three months ended in March, the best quarter since 1986. The metal rose 27% in 2024, its biggest annual gain since 2010. The June contract is currently up $86.20 (+2.88%) an ounce to $3076.40 and the DG spot price is $3074.00.
Gold last week hit new records above $3,000 an ounce, and while the precious metal has come off those levels, it remains near all-time highs.
New 104% U.S. levies against China went into effect at midnight Washington time. Economists at JPMorgan and Goldman Sachs raised the probability of a U.S. recession. That has put pressure on the Fed to cut interest rates to shore up the economy, even if the tariffs trigger a spike in inflation. The central bank closely follows labor market and inflation data when setting monetary policy.
The CPI and the producer price index reports, due out at the end of the week, will provide the next indicators on inflation. The U.S. monthly jobs report for March came out Friday and showed that the employment rate ticked up, even though the economy added a stronger-than-expected 228,000 jobs.
Investors increased bets that the Fed will cut interest rates sooner rather than later. 53.9% of investors tracked by the CME FedWatch Tool now expect the Fed to keep rates the same at the central bank’s next meeting in May, while the rest expect rates will be cut by 25 basis points. A week ago, more than 89% expected the Fed to keep rates unchanged in May. Lower interest rates are typically bullish for gold.
The Fed began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year. Previously, the Fed had kept rates at 5.25% to 5.50% for a year. The Fed left rates unchanged at 4.25% to 4.50% in March. It reduced rates three times in 2024.
Front-month silver futures gained 0.3% Tuesday to settle at $29.69 an ounce on Comex, and the May contract increased 1.6% in the first two days of the week. Silver advanced 9.9% in March after retreating 2.4% in February and adding 10% in January. It gained 21% in 2024. The May contract is currently up $0.699 (+2.35%) an ounce to $30.385 and the DG spot price is $30.39.
Spot palladium was unchanged at $913.00 an ounce Tuesday. It slid 0.7%. in the first two days of the week. Palladium gained 7.3% last month after retreating 10% in February and advancing 11% in January. Palladium dropped 17% last year. Currently, the DG spot price is up $1.70 an ounce to $916.50.
Spot platinum fell 0.1% Tuesday to $916.70 an ounce and has decreased 0.6% so far this week. Platinum increased 6.7% in March after sliding 4.7% in February and gaining 8.4% in January. Platinum lost 8.4% in 2024. The DG spot price is currently up $5.40 an ounce to $929.70.
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