Gold Tariff D-Day Looming

Despite gold being down 1% in December, global gold ETFs saw a monthly net inflow of $778 million (4 tons), driven by strong Asian demand, which counterbalanced outflows in North America. The NA outflows were moderate despite November’s overall weakness for precious metals and the likelihood of profit-taking after gold’s robust annual performance (up 26%). A positive outlook for gold likely constrained further outflows. Futures markets also experienced profit-taking, as managed money net long positions dropped by $4 billion (-49 tons), reducing total net positions to $65 billion (764 tons). Overall, gold has demonstrated resilience amid mixed market forces.

Uncertainty in the bond market may reduce gold's tendency to move inversely to bond yields, a positive development for gold. However, the yellow metal’s exceptional performance in 2024 suggests it could face short-term challenges, as technical indicators point to overbought conditions. Despite this, the longer-term upward trend remains intact, offering a potential opportunity for investors to enter the market at more favorable levels.

The impact of potential tariffs on gold remains a key topic of uncertainty. It is highly likely that there will be no clear resolution by D-Day (January 20th) or even for some time afterward, prolonging tariff-related ambiguity. Yesterday afternoon, the US dollar weakened following a Bloomberg report, potentially leaked by some of Trump’s advisers, suggesting the possibility of incrementally increasing tariffs by 2–5% monthly to bolster negotiating leverage going forward.