RBC Capital Markets analysts suggest that U.S. President Donald Trump’s imposition of tariffs on some of America’s key trading partners could ultimately be positive for gold prices due to heightened safe-haven demand.
Last week, Trump announced 25% import tariffs on Canada and Mexico, alongside a 10% tariff on China, citing concerns over these countries’ roles in illegal drug flow and immigration into the U.S. However, just hours before the tariffs were set to take effect, Trump delayed the duties on Mexico and Canada following talks with both nations’ leaders. Only the tariff on China was enforced, triggering retaliatory tariffs from Beijing and reigniting concerns over a renewed Sino-American trade war.
In response, China’s finance ministry imposed a 15% tariff on U.S. coal and liquefied natural gas, as well as a 10% duty on crude oil, agricultural equipment, and automobiles, effective February 10. Additionally, China’s commerce ministry placed export controls on rare earth elements, which are crucial in high-tech industries, and added U.S. companies such as PVH Corp (NYSE: PVH) and Illumina (NASDAQ: ILMN) to its unreliable entities list. Beijing also launched an antitrust investigation into Google (NASDAQ: GOOGL).
As these events unfolded, spot gold prices rose slightly, reaching near recent highs as investors turned to the metal amid concerns over the ramifications of the escalating trade tensions. RBC analysts believe that prolonged tariff impositions could lead to higher inflation and slower global growth, both of which are favorable for gold. These factors could drive further demand for the metal as a safe haven.
However, RBC also cautioned that gold prices may face some short-term volatility due to the stronger U.S. dollar and a potential decline in consumer purchasing power from rising inflation. Despite this, the analysts emphasized that the long-term outlook for gold remains positive, particularly as tariffs and trade-related uncertainty continue to shape investor sentiment. They view gold as a key risk hedge and a perceived safe haven, which could be increasingly in demand as uncertainty persists.
In conclusion, the analysts at RBC suggested that while immediate factors may create volatility, the longer-term impact of tariffs and economic uncertainty could provide ongoing support for gold prices.
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