White House moves to calm bullion markets after tariff threat
A ruling on the US Customs and Border Protection service's website said on Friday that Washington may place the most widely traded gold bullion bars in the United States under country-specific import tariffs, a move that would cause disruption in the precious metal's global supply chains.
The US border agency's ruling refers to cast gold bars from Switzerland, the world's biggest bullion refining and transit hub. The country is subject to White House import tariffs of 39 per cent.
US gold futures pared gains after the White House comments and spot gold, the global benchmark, was up 1.1 per cent on the day at $3,439.10, its second highest close in history.
The US agency said in a ruling letter that 1kg and 100-ounce gold bars should be classified under a customs code subject to tariffs, the Financial Times reported.
The Swiss Association of Precious Metals Manufacturers and Traders said that the clarification applied to any country delivering these bars to America.
'The United States is a longstanding market for us, so this is a blow for the industry and for Switzerland,' Christoph Wild, president of the association, said. 'With a tariff of 39 per cent, exports of gold bars will be definitely stopped to the US.'
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While Switzerland is the refining and transit hub, Britain is home to the world's largest over-the-counter gold trading hub, and South Africa and Canada are among major gold miners.
Gold bars have in the past been exempt from tariffs. The global gold market has traditionally used futures on the US Comex exchange to hedge positions, under the assumption that the metal could be physically shipped to the US to physically settle contracts if needed.
Swiss officials this week attempted to have the tariff increase overturned, but Karin Keller-Sutter, the Swiss president, appeared to be unsuccessful after meeting Marco Rubio, the US secretary of state, in Washington on Wednesday.
UBS bank said that about 78 per cent of Switzerland's gold exports to the US have been under the tariff-exempt 'unwrought' category for several years, which the new ruling appears to challenge.
have fuelled a historic rally for bullion this year, and spot prices of the precious metal have risen by more than a quarter since the start of the year.
Before 'liberation day' in April, traders rushed to bring gold to the US on the basis that the yellow metal might be subject to tariffs. However, when the levies were announced, exemptions covered certain types of bullion, which analysts believed at the time included gold bars.
It remains unclear whether other types of bar, such as the 400 troy ounce bar used in London, would also be subject to tariffs. It is also unclear when tariffs on gold would come into force and if they apply to exports from all countries.
Switzerland refines most of the world's gold
STEFAN WERMUTH/BLOOMBERG/GETTY IMAGES
Joni Teves, an analyst at UBS, said that the market could react by changing delivery standards, for example by allowing settlement of futures contracts in locations such as London.
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'In the long run, the existence of US tariffs on deliverable gold products raises the question of the role of futures trading in the US as a means to hedge and whether other centres eventually step up as alternatives,' Teves said.
'There is still a lot of uncertainty around all this, and until there is clarity, we expect the gold market and precious metals markets more generally to remain very nervous.'
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