Categories: Economy

Gold Advances on Dollar Softness, Tariff Jitters, and Geopolitical Risk

Gold prices climbed on Wednesday, buoyed by a softer U.S. dollar as investors grappled with persistent uncertainty surrounding American trade policy and escalating geopolitical tensions in the Middle East.

Bullion rose as much as 1.3 percent during the session, recouping a significant portion of the previous day’s 1.6 percent decline. The metal continues to find support from a confluence of factors: a lack of clear direction on U.S. import tariffs has driven safe-haven demand, while concerns over a potential military confrontation have added to the risk-off sentiment. This follows news of an American military buildup ahead of the next round of nuclear talks with Iran scheduled for later this week.

Having recovered more than half of the losses incurred during a historic two-day sell-off at the beginning of the month, gold has established a firm footing above the key $5,000 per ounce level.

“A breakout to the upside appears to be in the making,” said Yuxuan Tang, head of macro strategy for Asia at JP Morgan Private Bank. She noted that the combination of tariff ambiguity and geopolitical risk “may prove sufficient to catalyze a more sustained shift” in investor sentiment toward the precious metal.

Trade Policy in Focus

In the United States, the implementation of former President Donald Trump’s broad 10 percent import tariff took effect on Tuesday. This followed a Supreme Court ruling that invalidated his earlier reciprocal tariff framework. Although Trump subsequently threatened to increase the levy to 15 percent, no official directive has been issued to that effect.

In a related development that could pave the way for further trade restrictions, the Trump administration is preparing a series of national security investigations under Section 232 of the Trade Expansion Act. These probes will examine the impact of specific imports, including batteries and industrial chemicals, on domestic security.

Compounding the trade uncertainty, some importers are now seeking tariff refunds from the government, a move that could have significant fiscal repercussions. “It’s going to have dramatic implications for the U.S. budget deficit, the U.S. dollar, and Treasuries,” said David Wilson, director of commodities strategy at BNP Paribas SA, commenting on the potential for retroactive refunds.

Concerns over mounting sovereign debt have fueled the so-called “debasement trade,” where investors rotate out of bonds and currencies in favor of hard assets like gold. This dynamic was a primary catalyst for gold’s multi-year bull run prior to the abrupt correction witnessed at the end of January.

The Interest Rate Counterweight

Despite the bullish backdrop, the outlook for U.S. monetary policy could present headwinds for the non-interest-bearing asset. Federal Reserve Bank of Boston President Susan Collins indicated on Tuesday that interest rates are likely to remain on hold “for some time,” citing recent data that points to an improving labor market. This sentiment was echoed in the minutes from the Fed’s January policy meeting, published earlier this month, which showed officials were wary of cutting borrowing costs too quickly.

Market Snapshot

As of 3:38 p.m. in Singapore, spot gold was trading 0.8 percent higher at $5,187.23 an ounce. The Bloomberg Dollar Spot Index, a key measure of the greenback’s strength, slipped 0.2 percent, providing additional support for commodities priced in the currency.

The rally extended across the precious metals complex. Silver surged 3.8 percent to $90.47 an ounce. Platinum advanced 4.8 percent, while palladium added 0.9 percent.