The next gold rush?

The price of gold has risen every week so far this year, spiking more than 7% following Trump’s inauguration, outpacing Wall Street’s S&P 500 by a large margin and setting multiple record highs. Gold is typically seen as a safe haven asset class so it's no surprise that its jump in value comes in the wake of  widespread uncertainty fostered by the Trump administration. 

In particular, this is fuelled by fears of further tariffs or a trade war following recent tariffs on industrial metals. Last week, Trump imposed a 25% tariff on steel and aluminium, tightening up on the 10% aluminium tariff imposed during his last term. This has given rise to speculation that precious metals may be set to join the administration’s extensive tariff roster. Fabio Bassi, JPMorgan’s head of cross-asset strategy, ties the recent rally to the speculation surrounding gold. He states that “clearly” its price would “benefit from universal tariffs”.

In response, traders in New York have hurried to get gold over the border, out of any potential tariff’s line of sight, causing logistical difficulties, bottlenecks and shortages. Because gold is a physical asset, moving it in and out of vaults, let alone countries, takes time. As a result, the wait to withdraw bullion stored in the Bank of England’s vaults has risen from days to between four and eight weeks meaning the only thing outpacing the growth in the price of gold, is the growth in difficulties moving it.

COMEX gold inventories have seen the highest monthly inflows since May 2020, at the peak of the pandemic. 

This isn’t constrained to the Bank of England though. Retail sellers have also shown signs that they are feeling the pressure. Atkinson’s Bullion, for example, has put a banner on their website warning customers of potential delays.

Atkinson's Bullion displays a notice alerts customers that due to exceptionally high demand, dispatches may be delayed by two working days.

There have been doubts cast on whether the extent of this panic can be justified. Many of the recent tariffs are rooted in Trump’s approach to trade during his last term, such as those on steel and aluminium, but he has not expressed any desire to change tack by targeting bullion, not to mention gold specifically. Joe Cavatoni, market strategist at the World Gold Council, weighed in on the matter by displaying optimism that coming tariffs would not apply to bullion: “We are not getting a sense from the rhetoric from the administration that it intends to go after the monetary metals”.

However, traders are not necessarily just interested in acquiring Gold to dodge tariffs, it may be a symptom of wider and more general uncertainty in the US. Reade, of the WDC, points out that the ‘unprecedented’ political and economic risks created by the Trump administration are likely to push traders towards safe-haven assets such as gold: “This uncertainty will keep gold well-bid at times this year”.