Hi,
The global economy is constantly fluctuating, and one of the biggest drivers of the movement of the commodity market—in this case, gold and silver—is government-imposed tariffs. Trade wars, import duties, and international economic policies are all determinants that shape the precious metal market. But how are gold and silver prices impacted by tariffs? Are they going to rise, drop, or stay the same? Let’s take a deeper look.
How Tariffs Affect Precious Metal Prices
Tariffs are essentially duties imposed on imported goods that increase the price to consumers and businesses. Tariffs are typically used to protect home industries but can cause widespread economic consequences such as inflation, currency movements, and investment demand shifts.
Where gold and silver are concerned, there are a number of means through which tariffs can influence prices:
- Safe-Haven Demand and Inflation
Tariffs lead to an increase in the cost of goods and services, causing inflation. As inflation gains speed, investors purchase gold and silver as safe havens to maintain wealth. This increased demand causes the price of the two metals to rise.
- Weakening or Strengthening of the US Dollar
Being quoted in dollar terms, the dollar’s health has a big impact on the price of gold and silver. Weakening the dollar weakens the pace of the economy’s growth and raises trade tensions. With a weakened dollar, gold and silver are typically more attractive to investors internationally, prompting them to appreciate.
- Industrial Demand for Silver
Whereas gold has vital industrial applications, particularly in medicine, photovoltaic cells, and electronics, silver has vital industrial applications. If industrial production slows down and global supply chains are disrupted through the imposition of duties, the industrial demand for silver will be reduced, potentially pulling the price down. However, if investors are seeking shelter in silver from inflation, investment demand will be sufficient to offset the decrease from the industrial side.
- Impact on Mining and Production Costs
Tariffs placed upon shipping, refined metal, or mining machinery will increase the production cost of gold and silver. If the production cost rises, the producers will suppress the supply, which will cause the two metals to be more expensive.
Historical Examples: Tariffs and Bullion
Looking back to historical trade conflicts, we can see how gold and silver reacted to tariff uncertainty:
US-China trade war (2018-2019): The gold price climbed during this period under the pressure of market volatility and the spectre of an economic slowdown. Silver also mirrored the rise but to a lower degree due to weak industrial demand.
Steel and Aluminum Tariffs (2018): The steel and aluminum tariffs didn’t directly impact gold and silver but contributed to the global uncertainty that underpinned higher gold prices.
Post-COVID trade policies (2020 to date): As global supply chains grappled with disruptions, demand to use gold to hedge uncertainty continued to be robust, driving the price to new highs.
Will Tariffs Increase the Price of Gold and Silver?
Tariffs themselves don’t determine gold and silver prices but can be part of the economic environment that makes the metals more appealing to investors. If tariffs lead to:
Increased inflation → Price of gold and silver will rise
Weakening of the US dollar → Price rise of gold and silver
Industrial slowdowns → Silver demand may weaken but investment demand will offset it
Increased production costs → The gold and silver prices rise due to scarcity
Should You Invest in Gold and Silver Right Now?
Should new tariffs be introduced or trade tensions escalate, gold and silver will be more in demand as investors will be seeking safe havens. If you are considering investment in precious metals, the best time to buy your holdings is perhaps now before the market reacts to global economic shifts. We offer the lowest gold bullion and silver bullion prices at AU Bullion to guarantee that you gain the highest investment value. Whether a seasoned investor or a newcomer to investing, our wide variety of bullion products will safeguard your wealth from market volatility. Stay one step ahead of the market—shop gold and silver with AU Bullion.
