Gold futures rallied on Friday, posting their highest finish in over seven weeks, as investors fled to the perceived safety of havens like precious metals amid fresh signs of escalation in tariff tensions between the U.S. and its global trade partners.
“Washington’s threat of tariffs on Mexico exacerbated fears of a global trade war and recession, which saw a ‘flight to quality’ and gains for safe haven gold,” said Mark O’Byrne, research director at GoldCore.
Gold for August delivery on Comex GCM19, -0.02% rallied by $18.70, or 1.5%, to settle at $1,311.0 an ounce. The metal saw its highest finish for a most-active contract since April 10, FactSet data show. The gains lifted prices, based on the most-active contracts, up 2.1% for the week, and up 2% for the month, after three-consecutive monthly losses.
July silver SIN19, -0.05% meanwhile, added 7.6 cents, or 0.5%, to $14.567 an ounce, and saw a weekly rise of nearly 0.1%, but settled down 2.9% for May.
President Donald Trump announced in a tweet that the U.S. would impose a 5% tariff on all goods from Mexico until that country stops the flow of illegal immigrants into the country. He said the tariffs will rise to 10% on July 1 if the crisis persists, and by another 5% for every successive month, up to 25% by Oct. 1.
The U.S. “intending to impose trade tariff on Mexico, Germany and other eurozone nations apart from China will be bullish for gold,” said Chintan Karnani, chief market analyst at Insignia Consultants.
Also, the “investment world is filled with speculation that China is preparing to retaliate over the Huawei issue. Rare earth exports to [the U.S.] could be stopped in extreme circumstance,” he said.
Read: Is the threat of withholding rare-earth metals a key weapon in China’s trade war with U.S.?
Trump’s tariff announcement comes amid reports from Chinese state-owned media threatening fresh retaliatory measures in Beijing’s tariff spat with the U.S. That action comes as data from the second-largest economy in the world showed manufacturing activity slipped into contraction. China’s manufacturing purchasing managers index dropped to 49.4, with any reading below 50 reflecting contracting conditions.
Worries about intensifying trade clashes have been a key support for gold prices over the past few weeks, driving demand for gold and government debt alike.
The exchanged-traded gold fund, the SPDR Gold Shares GLD, +1.35% has gained 1.2% for the week, with a 1.3% gain in sight for the month. However, the silver-focused iShares Silver Trust SLV, +0.37% was set for a 0.1% weekly rise and drop of 2.5% in the month to date.
Both the Dow Jones Industrial Average DJIA, -1.41% and the S&P 500 index SPX, -1.32% declined Friday as gold futures settled. Investors exited assets considered risky in favor of so-called havens. In bonds, the yields on the 2-year U.S. Treasury note TMUBMUSD10Y, +0.00% and 10-year Treasury note TMUBMUSD10Y, +0.00% tumbled, also providing support for nonyielding gold.
Among other Comex-traded metals, July copper HGN19, -0.38% fell by 0.5% to $2.64 a pound, with the contract down 9.1% for the month. July platinum PLN19, -0.15% added a dime to $794.20 an ounce, ending just over 11% lower for the month. The most-active September palladium contract PAU19, -0.56% lost 2.5% to $1,331.50 an ounce, for a monthly decline of 3.6%, based on the most-active contracts.