The gold price cooled off this week as tariff-related uncertainty reached a resolution.
The yellow metal was thrust into headlines late last week when US Customs and Border Protection told a Swiss refiner that 1 kilogram and 100 ounce gold bars would be subject to Trump administration tariffs that went into effect on August 7.
Gold is one of Switzerland’s top exports to the US, and with the country facing a 39 percent levy, questions were rife about what the impact could be. Clarification came on Monday (August 11), when US President Donald Trump said on Truth Social that gold “will not be tariffed.”
While the news calmed market participants, Keith Weiner of Monetary Metals believes the incident could have long-term impacts. He said the tariff confusion caused the spread between spot gold and gold futures to blow out, creating difficulties for entities using the market to hedge.
Here’s how Weiner explained it:
“Once you’ve put the scare into everybody, you can’t just say, ‘Oh, sorry, just kidding.’ You can’t really do that. And so now we’ve done damage, and we’ll see what happens to that spread over time. We’ll see how users of the futures market adapt.
“There are other markets in the world that would be competing for this hedging business — maybe it moves to Singapore, maybe it moves to Dubai, maybe it moves to London, and the US loses not only a little more trust, but also a little bit of volume on what had been the biggest, or what is currently the biggest, futures market.”
This week also brought the release of US consumer price index (CPI) and producer price index (PPI) data. On a seasonally adjusted basis, CPI for July was up 0.2 percent from the previous month and 2.7 percent from the year-ago period. Meanwhile, core CPI, which excludes the food and energy categories, was up 0.3 percent month-on-month and 3.1 percent from the same time last year.
While those numbers were largely in line with expectations, seasonally adjusted July PPI figures came in hotter than expected, rising 0.9 percent month-on-month compared to Dow Jones’ forecast of 0.2 percent. Core PPI increased 0.9 percent from June compared to an estimated rise of just 0.3 percent.
Speaking about the implications of the data, Danielle DiMartino Booth of QI Research said it shows companies aren’t yet passing tariff-related price increases on to consumers.
This is what she said about how these circumstances could develop:
“I do think that we will see where companies feel they can push through price increases — I think we’ll see that. We saw quite a bit of food inflation in the PPI, and when you’re talking about things like essentials, and especially with very, very low-margin types of sales, we could see what we call the substitution effect begin, where households end up buying other things. The classic is always that they trade down from steak to ground beef, or trade down from beef to chicken.
“We’re going to see whether or not that plays out again.”
While the PPI data has slightly dampened expectations that the US Federal Reserve will cut interest rates when it meets in September, CME Group’s (NASDAQ:CME) FedWatch tool still shows a strong probability of a reduction at that time.
Bullet briefing — CATL closes mine, Mitsubishi invests in copper
CATL temporarily closes lithium mine
Contemporary Amperex Technology (HKEX:3750,SZSE:300750), better known as CATL, said on Sunday (August 10) that it will halt production at a lithium mine in China for at least three months.
Sources familiar with the matter told Bloomberg that CATL, which is the world’s largest electric vehicle battery maker, failed to extend a key mining permit. The company is reportedly in talks about a renewal, but is prepared for a months-long shutdown.
Share prices of lithium miners rose on the news, buoyed by expectations that the CATL mine closure will help reduce oversupply. Excess output has caused Chinese lithium prices to drop 80 percent since the end of 2022, and investors are keen to see a turnaround for the beleaguered battery metal.
Hudbay, Mitsubishi team up on copper
Mitsubishi (TSE:8058) is set to acquire a 30 percent stake in Hudbay Minerals’ (TSX:HBM,NYSE:HBM) Arizona-based Copper World subsidiary for US$600 million.
Hudbay called Mitsubishi its “strategic partner of choice,” while Mitsubishi said the investment will help advance its copper growth plans. A feasibility study is in the works for Copper World, and a definitive feasibility study is expected in mid-2026.
Hudbay shareholders reacted positively to the news, which comes on the back of a strong focus on copper supply after last month’s announcement of a 50 percent tariff on US imports of semi-finished copper products and intensive copper derivative products. The company projects that Copper World will result in a direct $1.5 billion investment into the US critical minerals supply chain.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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