Investors should remain vigilant, adopting strategies that hedge against potential risks while staying informed about policy changes and market forecasts to navigate the evolving landscape effectively.
Global trade policies, encompassing trade regulations, import duties, and taxation policies, play a pivotal role in shaping the dynamics of the gold industry. Recent developments have underscored the profound impact these policies can have on gold trade and pricing.
Influence of Trade Policies on the Gold Market
The introduction of new tariffs by major economies has significantly influenced gold prices. For instance, US President Donald Trump’s recent imposition of a 25 per cent tariff on imports from Mexico and Canada, along with doubling tariffs on Chinese goods to 20 per cent, has heightened economic uncertainties. In retaliation, China and Canada have implemented their own tariffs, with Mexico expected to follow suit.
According to Mangesh Chauhan, the MD and CFO of Sky Gold, these escalating trade tensions have bolstered gold’s appeal as a safe-haven asset, leading to price fluctuations.
In India, the Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates has led to a surge in imports of precious metals. The Global Trade Research Initiative (GTRI) expressed concerns over this increase, highlighting potential annual revenue losses and challenges to the domestic jewellery industry. The agreement allows unlimited imports of gold, silver, platinum, and diamonds from the UAE at reduced or zero tariffs over the coming years, prompting calls for a review to safeguard domestic interests.
Investor Guidance Amid Changing Trade Policies
In light of these developments, Chauhan advised investors to adopt a cautious and well-considered approach.
“David Rosenberg, a renowned strategist, emphasizes following Warren Buffett’s conservative investment philosophy during these unpredictable times. He recommends focusing on defensive assets, including cash, non-cyclical sectors like consumer staples, healthcare, utilities, and bonds with intermediate durations. For those considering a more aggressive stance, investments in gold are suggested, given its hedging benefits against geopolitical, financial, and recessionary risks,” the MD of Sky Gold said.
Future Outlook for Gold Prices
Analysts maintain a bullish outlook on gold prices. The bank’s analysis suggests that central bank demand could drive approximately two-thirds of the expected price rise, with the remaining one-third attributed to growing ETF flows following expected Federal Reserve rate cuts.
In summary, global trade policies are exerting significant influence on the gold industry, affecting both trade dynamics and pricing. Investors should remain vigilant, adopting strategies that hedge against potential risks while staying informed about policy changes and market forecasts to navigate the evolving landscape effectively.
