Gold prices rose on Thursday as increased safe-haven demand supported sentiments for the yellow metal.
Uncertainty about US President-elect Donald Trump’s trade tariff plans have fuelled safe-haven demand for gold, according to experts.
At the time of writing, the February gold contract on COMEX was at $2,693.66 per ounce, up 0.8% from the previous close.
Meanwhile, silver prices were on the rise as well as analysts from TD Securities said Trump’s tariff threats are having a massive impact on the precious metal.
Bright future for silver prices
The most-active March contract on COMEX was at $31.192 per ounce, up 1.7% from the previous close.
“It’s hard to see it in flat prices, but over the last month there’s been a huge disruption in precious metals markets where the threat of universal tariffs on metals is leading traders around the world to bring metal in from London and other global venues into the U.S., only to hedge against the risk that tariffs will be implemented on precious metals,” TD Securities’ Senior Commodity Strategist Daniel Ghali told Kitco.
Ghali said if tariffs are also imposed on precious metals such as gold and silver, traders holding short positions may suffer substantial losses.
“In order to hedge against that risk, they’re bringing metal into the U.S.”
Ghali added:
The challenge here is that the threat of universal tariffs is leading metal to go from the world’s largest venue into the U.S., depleting that inventory buffer that traders use for over-the-counter transactions every day.
Also, silver markets are in the fourth consecutive years of a deficit, which adds to the bullishness further.
Ghali was also very bullish about silver’s prospects. He sees prices around $40 per ounce this year, which is a substantial jump from the current level.
Silver prices had climbed more than 21% in 2024, and at certain points last year, the metal had even outperformed gold.
The precious metal is also considered an industrial metal because of its use in the batteries of electric vehicles.
As the world transitions away from fossil fuels, silver is likely to be in demand over the next few years.
Gold sees safe-haven inflows
Gold prices have climbed sharply over the last two sessions on uncertainties over the US’ economic policies.
According to a CNN report on Wednesday, Trump could declare an economic emergency in the US to push through his tariff plans.
Additionally, the minutes from the US Federal Reserve’s last meeting showed that policymakers were concerned about sticky inflation in the country.
Fed officials were concerned that Trump’s expansionary and protectionist policies could feed into higher inflation, making it challenging for the central bank.
Investors purchase gold during periods of higher inflation as a preferred hedge.
The minutes also showed that the central bank will slow down its pace of easing monetary policy in 2025.
This is bearish for gold prices as elevated interest rates makes non-yielding assets such as gold less attractive.
Copper prices rise
Copper prices on the London Metal Exchange rose after softer inflation in China raised hopes of more economic stimulus from the government.
China’s consumer price index inflation remained flat in December, while producer price index dropped for the 27th straight month.
Inflation was soft even after the government had announced a slew of measures to boost the economy in 2024.
At the time of writing, the three-month copper contract on LME was at $9,056.50 per ton, up 0.2% from the previous close.
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