On February 2nd, US time, early morning of January 3rd, Vietnam time, US President Donald Trump caused a stir in the global financial market when announcing the decree to impose a new countervailing tax on a global scale. This move not only increased trade tensions but also pushed gold and silver prices to the highest level in many trading sessions.
In his speech at the White House shortly after the North American market closed, President Trump expressed a tough stance: For decades, the United States has been devastated by other countries, whether friends or foes. American workers in the steel, auto, agricultural and handicraft industries have suffered too much. They have seen foreign countries take away jobs, sweep our factories, and destroy the American dream.
Mr. Trump emphasized that other countries have taken advantage of the US by imposing unreasonable tariff fences, manipulating currencies, export subsidies and stealing intellectual property. He stated: I signed a historic executive decree, imposing counterpart taxes on countries around the world. This is one of the most important days in the history of the United States. Today, we declared economic independence.
Mr. Trump affirmed that the revenue from tariffs will bring in terrifics of dollars to reduce taxes and repay public debt.
According to Kitco News, Mr. Trump's speech immediately created strong fluctuations in the precious metals market. World spot gold prices fluctuated strongly, soaring from 3,106 USD/ounce to 3,145 USD/ounce, before stabilizing around 3,127-3,138 USD/ounce at the end of the session.
Similarly, silver prices also broke out strongly, reaching the peak of the session at 34.154 USD/ounce at 4:30 p.m. Eastern time (3:30 a.m. on January 3, Vietnam time), before falling back to the support level of 33.890 USD/ounce.
Mr. Trump's announcement of a wide-range tax has caused investors to fall into a state of confusion. Chris Zaccarelli, chief investment officer of Northlight Asset Management, said that Mr. Trump's announcement had broken initial market expectations.
"At first, the market predicted a tax rate of only about 10%, but when the details were released, the actual figure was much higher - from 24% to 49% for countries outside the EU and the UK."
Mr. Zaccarelli believes that this uncertainty will continue to cause the market to fluctuate strongly in the coming time.
The only bright spot is that this could be an initial negotiation strategy and that the tax rate could fall after the US reaches agreements with other countries. But now, investors are reacting in the style of acting first, thinking later, said Mr. Zaccarelli.
Analysts believe that increased trade tensions could continue to flow into gold and silver as a safe haven. If the Trump administration continues to tighten tariffs, gold prices could increase even more strongly in the coming sessions.
