Since his election, President Trump’s tariff policy has tended to focus on China and the EU.
Last week his attention turned to Switzerland, bringing a particular spotlight on the gold market. 1KG gold bars, which are approximately the size of an iPhone and valued in excess of €94,000, were hit with a 39% tariff following clarification from the US Customs and Border Protection Agency.
Switzerland’s major refineries refine an estimated 70% of the world’s annual gold production, and is the centre of the global gold trade in accredited gold bars as they travel between London and New York. In the twelve months to the end of June, Switzerland exported more than $60 billion of gold to the US, with the vast majority refined by just four of the country’s biggest refineries. While the US would collect more than $23 billion in tariffs if exports continued at that rate, the reality is that exports of pure gold bars would dramatically decrease.
Other than an effort to see some refinery operations and jobs move to the US, Trump has other motivation to keep these tariffs in place. Some view this as the first step in a process for revaluing gold. Official statistics show US gold reserves at more than 261 million ounces (at live market prices, one ounce is approximately $3,400). If the US were to revalue gold above current market prices, it would add trillions of dollars to the US balance sheet.
The gold market itself has seen significant disruption as a result of this particular tariff, with a dislocation in the markets in London and New York. This was last seen in early 2020, when Covid lockdowns halted transatlantic travel and shipping. The premium paid above the spot price for gold 1KG bars in the US doubled in two days due to uncertainty and the potential for restricted supply.
As parties take delivery of their physical gold, there may prove to be a shortage of physical bars in the US in the coming months, which could play havoc with the ‘paper’ gold and ETF markets. For retail investors, the turmoil has shown the advantage in holding hard assets such as gold in physical form in their own jurisdiction.
If you are interested in investing in gold or silver, please contact Merrion Gold on 01 254 701, at info@merriongold.ie or at www.merriongold.ie
