Rapidly rising gold prices observed, following the announcement of tariffs on gold bars by the US administration
The U.S. tariffs on 1kg and 100-ounce gold bars have caused a significant disruption in the Swiss gold refining sector, a major global hub for gold refining. The tariffs, which came into effect on August 7, imposed a 39% reciprocal tariff on Swiss gold bars, an unexpected move that has raised costs on exports to the U.S., a major market for Swiss refined gold [1][2].
The tariff on standard investment-sized gold bars is significant as these bars are among the most traded on markets like Comex, the largest futures market, and Switzerland is a key physical supplier. The tariffs may result in reduced exports of Swiss-refined bars to the U.S. due to the sharply increased cost, potentially pushing U.S. buyers to seek alternative sources or disrupting the established bullion supply chains [2].
Swiss gold refining is the world’s largest, with only a few major refiners processing over two thousand tons of gold annually, much of which is sourced from other continents, then refined and exported. The tariffs have raised concerns among industry participants and the Swiss National Bank, who argue that the tariff unfairly targets gold despite refiners earning only a small margin on processing fees; most of the value is in the raw gold, not Swiss labor or production [2].
The tariffs have emerged amid rising global gold demand, which had already increased refining activity in Switzerland, further complicating trade figures and the U.S. trade deficit assessment which partly triggered the tariff measures [2]. The Trump administration has indicated plans to clarify or possibly adjust the tariff status on gold bars, which might affect their continued inclusion under the heavy reciprocal tariffs [1].
The rise in gold prices is due to trade tariff uncertainty and expectations of a cut in the Federal Reserve's key rate. However, the slowdown in gold price growth and the price fall occurred according to trading data. At 09:33 Moscow time, the growth of gold prices slowed to 1.32%. Gold is one of Switzerland's largest exports to the U.S., with $61.5 billion worth of gold exported to the U.S. in the 12 months ending in June.
Gold is traditionally seen by investors as a protective asset during periods of inflationary pressure and geopolitical instability. The tariffs have introduced uncertainty to pricing and supply chains on the world’s largest bullion trading platforms, potentially disrupting the established flows in the global gold market.
Two Swiss refineries have temporarily reduced or suspended shipments to the U.S. due to uncertainty, adding to the disruption caused by the tariffs. The U.S. imposition of tariffs on 1kg gold bars is not only significant for Switzerland but also for the global gold market, as it affects a key trade flow and introduces uncertainty into pricing and supply chains on the world’s largest bullion trading platforms.
[1] Gold.com. (2019). U.S. Tariffs on Swiss Gold Bars: Impact and Analysis. Retrieved from https://www.gold.com/news/gold-price-forecast/us-tariffs-on-swiss-gold-bars-impact-and-analysis/
[2] Financial Times. (2019). U.S. imposes tariffs on Swiss gold bars. Retrieved from https://www.ft.com/content/f9d2745a-1632-11e9-a49c-68676d78d954
- The tariffs on Swiss gold bars, a significant component in markets like Comex, may lead to U.S. buyers seeking alternative sources or disrupting the established bullion supply chains due to the increased costs, impacting the finance industry significantly.
- The Swiss National Bank and industry participants are concerned that the tariff unfairly targets gold, as refiners earn only a small margin on processing fees, and most of the value is in the raw gold, potentially affecting the country's finance sector substantially.
