This week’s price rise is also fueled by a softer US Dollar Index, which is near a two-week low. A weaker dollar tends to boost gold by making it more affordable for holders of other currencies. According to Ole Hansen, head of commodity strategy at Saxo Bank, “Uncertainty surrounding Trump’s tariff announcements has driven both gold and silver higher as investors weigh their implications for inflation and monetary policy.”
Will Trump’s Tariffs Increase Gold Demand?
President Trump’s tariff rhetoric has roiled markets, further supporting gold’s safe-haven appeal. His administration is considering tariffs of 10% on Chinese imports and 25% on goods from Mexico and Canada, citing concerns about trade imbalances and illegal fentanyl trafficking. These developments have created additional uncertainty in the markets, increasing demand for gold.
However, higher inflation due to rates could lead the Federal Reserve to maintain higher interest rates, potentially limiting gold’s appeal as a non-yielding asset. For now, central bank purchases continue to provide strong support, with ANZ analysts predicting rising investment demand will offset weaker physical demand.
Will dollar weakness persist?
The U.S. dollar traded back and forth between gains and losses on Wednesday as investors grappled with Trump’s rate uncertainty. After falling 1.24% on Monday, the dollar is showing signs of fatigue, which helped gold prices. “The dollar is very sensitive to Trump’s trade policies, and traders are hedging against potential rate risks,” said Helen Given, currency trader at Monex USA.
Elsewhere, Treasury yields remain flat as markets digest Trump’s policies and await upcoming U.S. economic data, including jobless claims and housing reports. Trade-exposed currencies such as the Canadian dollar and Mexican peso have weakened amid growing concerns about Trump’s trade policies.