Gold price rally ends abruptly following Trump tariff rollout
Gold prices have fallen for the third session in a row, despite the precious metal’s reputation as a safe haven amid global trade uncertainty.
Gold has fallen almost three per cent over the last week in US dollar terms after steadily increasing since the start of 2024.
The fall has come amid a global collapse in stock prices following the unveiling of US President Donald Trump’s sweeping tariffs, which economists fear could send the world into recession.
The precious metal actually performed strongly on the day of Trump’s tariff reveal, briefly hitting a new all-time high of $3,225 following the president’s reveal of tax numbers by country, before returning to $3,125.
Since then, however, it has retreated, briefly even falling below the coveted $3,000 mark this morning.
The fall in gold prices has come despite a decline in the value of the US dollar against other major currencies: When using gold prices in euros, gold is down almost six per cent since Thursday morning.
What is causing gold prices to fall?
While tariffs might be an important factor, analysts at Tatton Investment Management noted that with the end of the financial year last week, gold markets may be warped by portfolio rebalancing.
Since gold has performed so strongly in recent months, it will have become over-representative in many stockpicker portfolios, leading to a temporary selloff to correct proportions, the investment house’s analysts said.
Meanwhile, the rest of the market crashing has likely forced some investors to liquidate their positions in gold, pushing down the price.
“Margin calls from brokers is likely to have exacerbated some of the market movements,” explained Susannah Streeter, head of money and markets at Hargreaves Lansdown.
“Investors using more risky margin accounts can borrow money to invest, but falls in asset prices are prompting demands they deposit more money, as the value of assets used as collateral falls.”
Streeter also said that as investor nerves have increased, many will be looking to take advantage of profit made over the last year and move into cash.
However, Michael Brown, senior research strategist at Pepperstone, attributed gold’s fall to tariff risk premium being unwound after bullion imports were exempted from tariffs.
The research strategist argued that the price drop wasn’t “representative of a lack of haven demand”, and said he was still bullish on the precious metal.