Gold futures jumped on Friday, settling with a sharp gain as the threat of a global trade war pushed stocks and the dollar lower, underpinning a flight to the perceived safety for assets such as precious metals. The precious metal also scored a fillip from buying from investors looking to hedge against rising prices that are typically associated with global trade tensions.
Industrial metals were also trading in volatile fashion, though broadly higher in a Friday rebound, as traders assessed the potential impact of tariffs, including the long-run impact on economic growth.
April gold GCJ8, +1.42% settled $18.20, or 1.4%, to $1,323.40 an ounce. For the week, the metal ended down about 0.5% based on last Friday’s settlement.
Gold prices had settled at their lowest levels of the year on Thursday, after recording the first monthly loss, in February, since October. The metal was weighed down as the U.S. dollar’s benchmark index held ground at six-week highs.
“Gold is extending some of the gains it posted yesterday as concerns over a potential trade war brought the safe-haven back in fashion,” said Andreas Georgiou, investment analyst with XM. He noted that gold had pushed through a $1,320 resistance zone.
May silver SIK8, +1.59% rose 19 cents, or 1.2%, to $16.40 an ounce. Silver had touched a two-month low on Thursday. Silver, however, has marked a weekly decline of 0.3%. The silver-focused exchange-traded iShares Silver Trust SLV, +0.13% rose 0.2% and the SPDR Gold Shares GLD, +0.54% traded up 0.6% premarket.
Stock bulls and dollar holders are spooked by the news that President Trump has said he would sign orders next week imposing a 25% tariff on steel imports and a 10% tariff on aluminum. “You’ll have protection for a long time,” Trump told steel industry executives. Friday morning, Trump tweeted that a trade war would “good” and “easy.”
Read: Here’s why the stock market is taking the Trump tariffs so hard
The dollar moved firmly lower after the Trump tweet, with the ICE U.S. Dollar Index DXY, -0.29% falling 0.4% to 89.957, pulling off the six-week highs scored this week on a fortified outlook for continued U.S. interest-rate hikes this year.
See: Steel stock investors taken on a wild ride to gains by Trump’s tariff saga
Read: These Dow and S&P 500 stocks took the biggest hits on fears of a Trump trade war
The stock selloff left the three main benchmarks down sharply on the week, on track to break a two-week run of gains.
Traders were also still assessing Federal Reserve Chairman Jerome Powell’s second round of congressional testimony on Thursday. The new central bank boss struck a less hawkish tone than during his appearance on Tuesday, but was still seen as leaving the door open for four rate rises in 2018. Higher interest rates are negative for gold because they raise bond yields, reducing the attractiveness of nonyielding gold, and tend to boost the dollar. But any indication that the Fed is behind the curve on inflation could prove supportive for gold’s use as a hedge.
A protracted trade war could push inflation up and growth down, scuttling Fed plans.
After a busy week in economic news, Friday offers up one major data release. The final reading on consumer sentiment for February is out at 10 a.m. Eastern. There were no Fed speakers on deck on Friday.
See: MarketWatch’s economic calendar
Read: Here’s why the stock market took the Trump tariff announcement so hard
In other metals, May copper HGK8, +0.34% added less than a penny to less than 0.1% to $3.1245 a pound. For the week, the metal climbed 2.6%.
April platinum PLJ8, +1.00% rose $7.30, or 0.8%, to $965.10 an ounce, remaining near the two-month lows hit this week. For the week, however, the metal posted a weekly decline of 3.4%.
June palladium PAM8, +1.42% gained $13.45, 1.4% to $986.15 an ounce. Its settlement at $973.20 on Thursday was the lowest finish in nearly three weeks. The white metal, however, posted a weekly drop of 2.7%.
Platinum and palladium prices were pressured this week as a German court reportedly ruled that cities have the right to ban diesel motors to improve air quality. Both metals are used in the automotive industry.
As for the latest trade developments, at least one analyst said the greater impact on commodity prices hinges on whether countries take additional steps to counter U.S. action.
“U.S. steel prices had already soared in anticipation of the tariffs. They may continue to rally, but there will come a point soon when imports become competitive again,” said Caroline Bain, chief commodities economist with Capital Economics. The firm’s forecast puts U.S. steel prices at year-end at $700 per metric ton, somewhat lower than $790 today, but still much higher than the price of $476 in October 2016 before Trump was elected.
“China’s prices are unlikely to respond much to U.S. tariffs given that the country’s exports to the U.S. have already collapsed and at least 85% of China’s steel output is used domestically,” she added.
The bigger issue? “Perhaps the biggest risk to commodity markets and prices though is that this could represent the start of a more general ratcheting up of protectionist barriers as affected countries retaliate,” Bain said.
—Mark DeCambre contributed to this article