Gold Faces Pressure as Trump Rolls Out Tough Trade Policy

Gold has recovered the $2,640 per ounce mark after two days of declines, and is up 0.2% today. Following Donald Trump’s election to a second term in the White House, gold has been severely depreciating, which has strengthened the US dollar in anticipation of protectionist trade policies that target imports, particularly those from China.

There are more plans forming regarding the features of this policy, which seems more aggressive than previously, as Trump’s inauguration draws near on January 20. According to the Washington Post, Trump’s advisers are considering levying tariffs on all nations, with the exception of imports of essential commodities.

The Post claims that the growing trade aggression may have detrimental effects on the world economy, interfere with international trade, and increase prices for US consumers on a variety of goods. In reaction to the article in the Post, Trump declared that he would not back down from the imposition of these tariffs. This also follows his declaration that he would impose massive tariffs on Canada, Mexico, the European Union, and China.

Although there are differing opinions among experts about how these tariffs might affect US inflation, the Treasury market is pricing in a year when interest rate cuts might not happen quickly, which is keeping pressure on gold. Concerns regarding the higher-for-longer rates have also increased as a result of the Federal Reserve’s leaders, particularly Jerome Powell, adopting an extremely cautious stance.

The yield on the 10-year Treasury bond is still close to its highest level since last May, at 4.62%. According to CME FedWatch Tool, there is a 7% chance of a rate cut at this month’s meeting and a less than 40% chance of one in March.