Gold futures in the U.S. reach an all-time peak following news of potential tariffs
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The imposition of a 39% tariff by the U.S. on 1kg gold bars imported from Switzerland has disrupted established trade flows and significantly raised costs for importers, causing turbulence in the overall global gold market, particularly in the physical bullion sector.
Key Implications
The tariff has already led to increased prices and market turbulence, with gold futures prices in the U.S. hitting record highs due to supply concerns and increased costs for bullion backed by Swiss-refined bars. Switzerland is a major supplier of the globally traded 1kg bars on markets like Comex.
The tariff is also expected to put pressure on the U.S. recycled gold market, as demand may shift to reclaimed/recycled gold within the U.S., potentially inflating prices there.
Switzerland, a major gold refining center, faces setbacks as its gold bar exports to the U.S. become more expensive, likely reducing export volumes and impacting refining operations. This could lead to trade flow disruption from refining hubs.
The White House has indicated a forthcoming executive order might clarify or alter the tariff application to gold bars, injecting uncertainty into markets and trade planning.
Impact on the Gold Market
The gold market could be significantly affected by tariffs on bullion. Gold is considered a safe haven investment, and the tariff could lead to short- to medium-term volatility and potentially shift sourcing and pricing dynamics worldwide.
The imposition of this tariff introduces a significant new trade barrier in a critical segment of the global gold supply chain, likely causing the aforementioned effects.
Noteworthy Points
- The 39% tariff on gold bars is one of the highest tariffs implemented by Washington.
- Gold for December delivery reached an all-time high of US$3,534.10 per ounce on the Comex, the world's biggest futures market.
Analysts such as Carsten Fritsch of Commerzbank and Ole Hansen, head of commodity strategy at Saxo Bank, have stated that the tariffs on bullion would have serious implications for the gold market. The US Customs and Border Protection agency has classified gold bars weighing 1kg and 100 ounces as subject to tariffs.
[1] Financial Times, "US imposes tariffs on Swiss gold bars, rattling global market," 24 September 2021, https://www.ft.com/content/385399e6-513a-4e29-b590-2577616321c5
[2] Reuters, "U.S. tariffs on Swiss gold bars to disrupt trade, raise costs for importers," 24 September 2021, https://www.reuters.com/business/us-imposes-tariffs-swiss-gold-bars-disrupt-trade-raise-costs-importers-2021-09-24/
[3] CNBC, "Gold prices surge as U.S. imposes tariffs on Swiss gold bars," 24 September 2021, https://www.cnbc.com/2021/09/24/gold-prices-surge-as-us-imposes-tariffs-on-swiss-gold-bars.html
- The upcoming executive order from the White House could potentially alter the tariff application to gold bars, which could significantly impact investing in gold-based financial instruments, particularly in Malaysia, where technology plays a crucial role in online trading platforms.
- The tariff on gold bars imported from Switzerland has given rise to market turbulence, causing gold prices to soar, and this could encourage technology-driven investors in Malaysia to switch their focus to technology-related sectors, as the increased costs of gold investing may deter them.
