Trump's Liberation Day to fuel inflation, knock sheen off gold

Reuters and staff reporter

US President Donald Trump will unleash massive tariffs today against all major US trading partners to fulfil his administration's ambitious economic agenda.

The rollout, dubbed by the president as "Liberation Day," is expected to fuel inflationary pressures and take the shine off gold, which has been on a record-breaking rally.

White House aides had drafted a proposal to impose tariffs of around 20 percent on most imports to the United States, the Washington Post reported yesterday. White House advisers say no final decision has been made and that several options are on the table.

Trump's administration is also weighing using the trillions of dollars it expects in new import revenue for a tax dividend or refund, the report said.

Trump had said his reciprocal tariffs to be announced today would include all countries, not just a smaller group of 10 to 15 countries with the biggest trade imbalances.

The European Union has a "strong plan" to retaliate against tariffs imposed, and set to be imposed, by Trump, although it would prefer to negotiate a solution, EU executive chief Ursula von der Leyen said yesterday.

Gold set fresh records yesterday, with the price of spot gold once hitting an all-time high of US$3,148.88 (HK$24.561) an ounce, as concerns that Trump's reciprocal tariffs might fuel inflationary pressures and impede economic growth drove safe-haven demand.

Gold closed out its strongest quarter since 1986 on Monday, after climbing past US$3,100, marking one of the most significant upswings in the precious metal's history.

On a technical basis, gold's Relative Strength Index stands above 70, indicating the metal is overbought.

"The anticipation of the April 2 US reciprocal tariffs has led market participants to lean towards a defensive stance, with some de-risking and turning to safe-haven gold as a hedge against impending portfolio volatility," IG market strategist Yeap Jun Rong said. "While technical indicators suggest overextension in the near term, uncertainty surrounding the tariffs is likely to sustain gold's traction for now, with buyers seemingly eyeing for a retest of the US$3,200 level next," he said.

"I'm looking for a long overdue correction before an eventual push towards our target at US$3,300... a correction will only get a bit more serious if we break below the US$2,955 area," said Ole Hansen, head of commodity strategy at Saxo Bank.

Markets are also closely monitoring the automobile tariffs, which will take effect tomorrow.