Gold Steadies as Strengthening Dollar Outweighs Haven Demand

Gold steadied, with a surging dollar outweighing haven demand as the world braces for trade wars after President Donald Trump imposed tariffs on Canada, Mexico and China, Bloomberg reported.

Bullion traded just below $2,790 an ounce, close to a record high reached on Friday. A gauge of the dollar jumped as much as 1.3% to its highest in more than two years. The inflationary impact of tariffs between the world’s biggest economies may keep borrowing costs elevated, a headwind for gold that doesn’t offer any interest, while a rising dollar makes it pricier for many buyers.

“Those dynamics are overwhelming haven demand for now,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp, adding that an uptick in price pressures may impact the Federal Reserve’s easing cycle. “But if trade tensions intensify with more tit-for-tat measures, then we may start to see demand for gold pick up again.”

The US announced tariffs of 25% on goods from Canada and Mexico, and 10% on those from China, set to take effect Tuesday. Canadian energy imports will face a 10% levy. Ottawa unveiled a 25% counter-tariff on US goods, Mexico pledged retaliatory actions and Beijing issued a statement vowing “corresponding countermeasures.” Trump has also threatened tariffs against the European Union, which said it would respond firmly.

A global trade war would be a major headwind for growth, force a reorganization of global supply chains, and threatens to roil financial markets. While gold would typically benefit from haven demand in such a scenario, moves in the dollar and the interest-rate outlook are offsetting those pressures. Some of the impact may already be priced in, with the precious metal up almost 7% so far this year, following a 27% rally in 2024.

Trade war fears have already jolted precious metals markets, with US prices of gold and silver surging above international benchmarks in recent weeks, causing dealers and traders to rush huge volumes of the metals into the US before any tariffs are imposed. The chaos has also led to a spike in lease rates for gold and silver — the return that holders of bullion in London’s vaults can get by loaning their metal out to other buyers on a short-term basis.

Spot gold was mostly unchanged at to $2,797.88 an ounce as of 9:36 a.m. in London, after climbing 1% last week. The Bloomberg Dollar Spot Index rose 0.9%. Silver, platinum and palladium all dropped.