Clients Buy Dip as Tariffs Drive Market Mayhem

Precious metal markets were engulfed in broader market chaos overnight, with gold in USD terms falling by 1.5%, while silver fell by 6%, last trading just below USD $32 per troy ounce (oz).

The move lower in the metals represented an abrupt change of direction, with gold in particular hitting new highs earlier in the week, after the Trump White House finally announced its “Liberation Day” tariff plans.

Gold soared in the immediate aftermath, trading up over USD $3,150oz, while silver pushed back up toward USD $34oz, with prices in local currency rising above AUD $5,050oz for gold and AUD $54oz for silver.

As of this morning, prices are just below AUD $5,000oz for gold, while silver is trading at AUD $51oz, with morning activity showing clients of ABC Bullion aggressively buying this dip in the metal markets.

Equity markets on the other hand have been in freefall since the announcement, with the ASX 200 in Australia opening yesterday with a near 2% fall, with further losses expected during market hours today.

Risk assets were even harder hit overseas, with US and European stock markets seeing one of their worst days in years. The S&P 500 fell by 4.84%, while the NASDAQ fell by almost 6%, its worst one day fall since March 2020.

While it is too early to be certain, differentials in equity market sell offs may be in part driven by the fact the tariff rates imposed by the White House were not uniform, with Australia “only” receiving a 10% tariff, while the European Union was hit with a 20% rate. 

While markets will eventually digest the tariff news and move to a new equilibrium of sorts, there seems little doubt that gold in particular will be a beneficiary of this “new world order” as it relates to global trade, with inflation set to be pressured to the upside, while growth will be negatively impacted.

Discussing the news, Scott Lincicome of the CATO Institute noted that; “With today’s announcement, U.S. tariffs will approach levels not seen since the Smoot-Hawley Tariff Act of 1930, which incited a global trade war and deepened the Great Depression”, with an article in AP news highlighting the risk these policy developments pose to international trade. 

Despite their obvious potential to stoke inflation, the tariff announcement mays also encourage central banks to speed up their rate cutting cycle, with markets now suggesting that in Australia for example, the cash rate will be below 3.25% by the end of this year. Allowing for inflation, it looks like we are headed back toward a zero, or even negative interest rate world.  

That will almost certainly be supportive of higher gold and silver prices in the medium to long-term.

Talking Gold

Media interest in precious metals has increased alongside the surging gold price, with the USD $3,000oz price point making it front page news. The gold and silver price rally, as well as the economic backdrop in which the rally is occurring, is serving to fuel interest in both precious metals, with new account activations, and turnover with clients at some of the highest levels on record at ABC Bullion.

This week we discussed the surging interest in gold, and the surging gold price, with Richard Hudson, the Executive Producer of Western Australia Country Hour for the ABC,  with our conversation coinciding with the precious metal topping AUD $5,000oz.

We covered the latest developments in the gold market, what has driven the recent surge, why investors gravitate toward precious metals in times of uncertainty, and the outlook for the metals going forward.

Jordan Eliseo
General Manager, ABC Bullion Australia

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