Gold price may spike due to US tariffs

New Straits Times

6 hours ago

KUALA LUMPUR: Gold prices could spike one to three per cent in the near term after the United States slaps tariffs on imports of one-kilogramme gold bars, experts said.
The move may also prompt buyers in the US to pay an extra US$5-US$20 per ounce on top of the spot price for the physical metal, they added.
The United States (US) on Friday slapped tariffs on imports of one-kilogramme gold bars, a move that threatens to upend the global bullion market and deliver a fresh blow to Switzerland, the world's largest refining hub.
Analysts reportedly said the decision could push US buyers to seek supply from non-Swiss refiners, potentially driving gold prices higher.
Gold futures vaulted to a fresh all-time high of US$3,534.10 an ounce after news of the tariff broke, while spot prices held near US$3,394, heading for a second straight weekly gain.
UCSI University Malaysia associate professor in finance and research fellow at the Centre for Market Education Dr Liew Chee Yoong said the US move represents a significant potential disruption to established global bullion supply chains.
The policy shift could cause short-term physical supply bottlenecks for US buyers, Liew told Business Times.
"Switzerland processes about 70 per cent of the world's gold. Alternative refining centres in Turkey, the UAE or India lack the spare capacity to seamlessly fill the gap.
"This could push US physical premiums up by US$5 to US$20 per ounce as supply chains adjust," he added.
However, Liew noted that the total global gold supply remains unchanged, with gold originally bound for the US likely to be redirected to other markets, particularly in Asia, before potentially re-entering the US at higher cost and complexity.
He said gold remains a deeply liquid, globally traded commodity, and the derivative markets including futures contracts and exchange-traded funds play a dominant role in setting the benchmark spot price.
"The tariffs primarily introduce a US-specific cost layer rather than constituting a genuine global supply shock. Nevertheless, near-term price volatility is a distinct possibility.
"In the short term, we could see a one to three per cent spike in global prices due to speculative buying.
"Over the longer term, persistent tariffs could erode Swiss refining dominance, benefiting non-Swiss refiners and prompting central banks to source gold directly, bypassing traditional Western trading hubs," he said.
SPI Asset Management managing director Stephen Innes views the move as "a structural tremor, not just a knee-jerk spike".
He added: "Tariffs on Swiss-refined gold were not in anyone's playbook. Gold, traditionally viewed as apolitical and tariff-proof, just got pulled into the battleground.
"That is a big line to cross. Traders are scrambling to reprice not just flows, but jurisdictional risk."
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the tariffs come amid an already bullish outlook for gold in the second quarter.
Mohd Afzanizam said the US tariff policy is expected to have a detrimental impact on their economy as prices rise.
"Coupled with the US$4.5 trillion tax cut measures funded partly by Medicaid spending cuts and reduced clean energy subsidies, this could affect the US government's credit profile," he said.
Mohd Afzanizam noted that the US is already no longer a AAA-rated country after Moody's downgraded it to Aa1 in May.
"I suppose this can have a material impact on the US dollar status as the safe haven and clearly, gold seems like a natural substitution. We foresee gold prices could climb in the second half of 2025, possibly around US$3,500 per ounce," he added.