Trump's wielding of the "tariff stick" against Canada has triggered risk aversion! Three hidden mysteries behind the continued rise in gold prices
2025-07-11 09:47:02
On Friday (July 11) in the Asian session, US President Trump dropped a "tariff bomb" on social media, announcing that a 35% tariff would be imposed on all Canadian goods from August 1, a 10 percentage point increase from the current rate. This decision was like a bolt from the blue, instantly igniting the market's risk aversion sentiment. Spot gold prices soared, reaching an intraday high of $3,336 per ounce, a three-day high, and are expected to rise for three consecutive trading days.
A closer look at Trump's tariff announcement shows that it is a combination of "hard and soft tactics". White House officials urgently "put out the fire" by saying that goods that meet the USMCA can still be exempted, but stressed that the policy may change at any time. It is worth noting that this is the third time the Trump administration has put pressure on Canada this year - it has previously imposed a 25% tariff on non-agreement goods, and now it has raised another 10 percentage point punitive tariff, which is equivalent to a cumulative tax rate of up to 60% on certain goods.
A White House official said that goods that meet the US-Mexico-Canada Agreement, a free trade agreement, can still be exempted, and stressed that the situation may change. After the official spoke, the price of gold gave up its gains and fell to around $3,325. Currently, spot gold has risen above $3,330 again.
Trump already has a 25% tariff on goods that don't comply with the U.S.-Mexico-Canada Agreement, the official said, and the new rate, announced in a letter to Canadian Prime Minister Mark Carney and posted on social media, would mean that figure rises to 35%. The United States and Canada have been in talks aimed at reducing tariffs ahead of a self-imposed July 21 deadline.
According to people familiar with the matter, Canadian Prime Minister Mark Carney's team is urgently evaluating countermeasures. Although the Canadian side expressed its willingness to accept the reality of "partial tariffs" in the negotiations, it insisted on keeping the tax rate within a "tolerable range." The turning point of this game occurred two weeks ago: Trump interrupted the negotiations on the grounds of "unfair digital service tax", and the two sides returned to the negotiating table after Canada announced the abolition of the tax.
The gold price fluctuations this time were not driven by a single event. Trump launched three consecutive "tariff combinations" within 48 hours: except for Canada, US copper imports will face a 50% tariff, Brazilian goods will also be subject to a 50% heavy tax, and there is even a rumor of "15%-20% general tariffs". This indiscriminate attack directly stimulated the influx of safe-haven funds into the gold market.
However, the rise in gold prices is still constrained by two major factors: on the one hand, the US dollar index also rose 0.3% in the short term, and is expected to rise 0.8% on a weekly basis. The strong dollar has suppressed the attractiveness of gold denominated in US dollars; on the other hand, the US employment data was unexpectedly strong, with the number of initial jobless claims last week hitting a seven-week low, weakening market expectations for the Federal Reserve's aggressive interest rate cuts.
It is interesting to note that the White House suddenly blasted the Federal Reserve on the same day that the tariffs were announced. A senior government official accused Powell of "serious mismanagement" and blamed monetary policy for the fiscal deficit. On the other hand, Fed Governor Waller sent contradictory signals: he hinted that the balance sheet reduction would continue, but insisted that "interest rates should be cut this month." This policy confusion further strengthened the safe-haven attribute of gold.
The current gold price is at a delicate balance point: geopolitical risks and the strength of the US dollar are wrestling with each other. If Trump continues to escalate the trade war, the gold price is expected to break through the key resistance level of $3,350; on the contrary, if the Federal Reserve releases hawkish signals, it may trigger a short-term correction. Investors need to pay close attention to the deadline for the US-Canada negotiations on July 21, which may become the next "black swan" that determines the trend of gold.
(Spot gold 15-minute chart, source: Yihuitong)
At 09:45 Beijing time, spot gold was trading at $3,330.63 per ounce.
Tariff details are hidden
A closer look at Trump's tariff announcement shows that it is a combination of "hard and soft tactics". White House officials urgently "put out the fire" by saying that goods that meet the USMCA can still be exempted, but stressed that the policy may change at any time. It is worth noting that this is the third time the Trump administration has put pressure on Canada this year - it has previously imposed a 25% tariff on non-agreement goods, and now it has raised another 10 percentage point punitive tariff, which is equivalent to a cumulative tax rate of up to 60% on certain goods.
A White House official said that goods that meet the US-Mexico-Canada Agreement, a free trade agreement, can still be exempted, and stressed that the situation may change. After the official spoke, the price of gold gave up its gains and fell to around $3,325. Currently, spot gold has risen above $3,330 again.
Trump already has a 25% tariff on goods that don't comply with the U.S.-Mexico-Canada Agreement, the official said, and the new rate, announced in a letter to Canadian Prime Minister Mark Carney and posted on social media, would mean that figure rises to 35%. The United States and Canada have been in talks aimed at reducing tariffs ahead of a self-imposed July 21 deadline.
According to people familiar with the matter, Canadian Prime Minister Mark Carney's team is urgently evaluating countermeasures. Although the Canadian side expressed its willingness to accept the reality of "partial tariffs" in the negotiations, it insisted on keeping the tax rate within a "tolerable range." The turning point of this game occurred two weeks ago: Trump interrupted the negotiations on the grounds of "unfair digital service tax", and the two sides returned to the negotiating table after Canada announced the abolition of the tax.
Multiple factors boost gold prices
The gold price fluctuations this time were not driven by a single event. Trump launched three consecutive "tariff combinations" within 48 hours: except for Canada, US copper imports will face a 50% tariff, Brazilian goods will also be subject to a 50% heavy tax, and there is even a rumor of "15%-20% general tariffs". This indiscriminate attack directly stimulated the influx of safe-haven funds into the gold market.
However, the rise in gold prices is still constrained by two major factors: on the one hand, the US dollar index also rose 0.3% in the short term, and is expected to rise 0.8% on a weekly basis. The strong dollar has suppressed the attractiveness of gold denominated in US dollars; on the other hand, the US employment data was unexpectedly strong, with the number of initial jobless claims last week hitting a seven-week low, weakening market expectations for the Federal Reserve's aggressive interest rate cuts.
The Fed’s game is undercurrent
It is interesting to note that the White House suddenly blasted the Federal Reserve on the same day that the tariffs were announced. A senior government official accused Powell of "serious mismanagement" and blamed monetary policy for the fiscal deficit. On the other hand, Fed Governor Waller sent contradictory signals: he hinted that the balance sheet reduction would continue, but insisted that "interest rates should be cut this month." This policy confusion further strengthened the safe-haven attribute of gold.
Outlook
The current gold price is at a delicate balance point: geopolitical risks and the strength of the US dollar are wrestling with each other. If Trump continues to escalate the trade war, the gold price is expected to break through the key resistance level of $3,350; on the contrary, if the Federal Reserve releases hawkish signals, it may trigger a short-term correction. Investors need to pay close attention to the deadline for the US-Canada negotiations on July 21, which may become the next "black swan" that determines the trend of gold.
(Spot gold 15-minute chart, source: Yihuitong)
At 09:45 Beijing time, spot gold was trading at $3,330.63 per ounce.
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