【MACRO Insight】Trump’s 25 % tariff impact - a sudden change in the outlook for the metal market and

The new US administration's threat to impose import tariffs of up to 25% continues to roil commodity markets. Bart Melek, global head of commodity strategy at TD Securities, noted that while many market participants are focused on potential shortages of gold and silver, that may not be where the shock is really happening. When asked about the prospect of Trump's tariffs in an interview, he remained restrained but still conveyed the potential impact. He mentioned that the surge in EFP transactions in the physical silver and gold markets was entirely due to market concerns about the amount of tariffs.

At present, the focus of tariffs seems to be Canada and Mexico, but this will not only affect the metal market, but also the energy market, which has a more important impact on the overall economy than the metal market itself. Taking the impact of tariffs on Canadian metal producers on the US supply chain as an example , the US government may create a thorny problem for its own industry. Resource companies send large amounts of copper and zinc to the southern United States, and Canada is a major oil supplier to the United States.

States imports about 4.5 million barrels of crude oil from Canada every day, most of which is heavy crude oil, which is used to produce not only gasoline, but also heavier fuels and other by-products needed for industrial and commercial cargo transportation. Even if refineries are converted, it takes a lot of money and time, and the United States does not actually have enough heavy crude oil. If it imports from Venezuela, not all sectors of its industry are running at full speed; if it imports from Saudi Arabia or elsewhere, a lot of logistics will also need to be readjusted. Therefore, in the short term, due to the lack of elasticity of oil prices, the United States may bear most of the 25% tariff, resulting in higher prices.

tariffs will have a significant impact on precious metals prices, but this is not a supply and demand situation as many market experts suggest, but more likely investors are dealing with soaring inflation. If broad tariffs on commodities and manufactured goods are implemented, total prices will rise almost immediately, partly paid in full by American consumers and partly passed on to producers, but overall, prices will rise. This depends on the actions of the Federal Reserve . If the Federal Reserve cuts interest rates sharply when tariffs cause inflation, it may be a phenomenon similar to the late 1970s and early 1980s, that is, tariffs cause a supply shock, monetary policy fuels this shock, and thus causes an inflation problem, which may not only be a US, but a global inflation problem.

After plunging from its all-time highs after the U.S. election, gold prices have recovered all the lost ground before breaking through $2,750 again, gradually moving back toward all-time highs. According to the Commitment of Traders report, from January 7 to 14, net long gold positions of managed funds, other funds and non-reportable funds increased by $6.3 billion, extending gains of $2.4 billion from the previous week. During the same period, gold prices rose 0.6%, outperforming despite a 0.7% stronger dollar and higher real interest rates . New longs dominated, with long positions increasing by $5.4 billion, or 86% of the total.

The latest US CPI data validates the bulls' resolve. Between January 14 and 21, gold rose 2.9%, the dollar fell 1.1%, real interest rates fell 15 basis points , and the mild December CPI report was the main catalyst. Total open interest increased every trading day, totaling $12.5 billion, indicating continued long-term demand. According to Goldman Sachs research, the market is pricing in a 10% chance of a 10% US tariff on gold. Nonetheless, ETF flows look similar. From January 7 to 21, total known ETF holdings increased by 730,000 ounces.

Goldman Sachs' spot forecast for central bank and other institutional gold demand in the London OTC market shows strong demand in November, reaching 117 tons, well above the forecast of 46 tons. Immediately afterwards, Goldman Sachs' analysts raised their forecasts for central banks, now expecting monthly purchases to average 41 tons by mid-2026 (previously 38 tons). China was once again the largest buyer, adding 50 tons, followed by unidentified central bank demand through Swiss purchases, totaling 43 tons.

The US government's threat to impose a 25% import tariff has had a profound impact on the metal, energy and precious metals markets. The metal supply chain is at risk of disruption, and the energy market is vulnerable due to the US's reliance on Canadian heavy crude oil, which may lead to higher costs for consumers in the short term. In the precious metals market, gold prices have performed well driven by inflation expectations, and the market remains highly vigilant about inflation and global economic risks caused by tariffs.