Gold Record High After Tariffs Ruled Illegal

A US Court of Appeals ruled that most of the tariffs imposed by the Trump Administration are illegal, throwing the trade situation into uncertainty, and gold rises to a new record high.

The Latest Developments

• A Federal Appeals Court ruled on Friday that most of Trump's tariffs targeting countries were illegal, but that the levies could stay in effect until an appeal is filed.
• The ruling adds to policy uncertainty going into September, historically the worst-performing month for equities.
• Rising uncertainty and expectations surrounding a Fed rate cut at the September 17th meeting have helped drive a surge in precious metals.

Trump Exceeded Authority to Impose Most Tariffs

The US Federal Court of Appeals ruled on Friday, upholding a decision made in May by the New York-based Trade Court, that by imposing tariffs through the International Emergency Economic Powers Act (IEEPA). The ruling covers most of the tariffs imposed by the White House, including the "reciprocal" tariffs targeting most countries worldwide, as well as tariffs on China, Canada, and Mexico. The court allowed the tariffs to remain in place until October 14, giving the administration time to file an appeal with the Supreme Court. Sector-specific tariffs, such as those on copper, steel, and aluminium, because they were implemented under a different legal framework, which raises the possibility of a legal workaround for maintaining the tariffs. Trump immediately criticised the court's decision, saying he would appeal.

at a potentially critical time. US indices had a solid performance in August, with the benchmark S&P 500 rising 2.0%. However, they are now heading into September, which is historically the worst month for equity performance. The added uncertainty surrounding the tariffs could prompt investors to seek safe havens, supporting precious metals alongside other defensive plays.

Uncertainty, Fed Boosts Gold

After the markets had the weekend to digest the implications of the Court ruling on tariffs, amid expectations of a rate cut. Silver prices also broke $41 per ounce on Monday, a record in its own right. Gold prices have risen 34% since the start of the year, as the dollar weakens amid uncertainty driven by tariffs. Last week, Trump attempted to fire FOMC member Lisa Cook in an unprecedented move that the courts will likely have to resolve in a months-long process. Initial arguments in a Washington, DC federal district court on Friday did not leave it clear whether Cook was still serving in the Fed, adding to uncertainty about policy. The threat to the Fed's independence is seen as raising safe-haven demand, which could help support gold.

Gold Prices Surge, But Might Be Overbought

In scoring its all-time high on Monday, gold challenged the $3500 per ounce resistance level amid a weaker dollar but failed to break through. Further upside would face resistance at the measured-move projection of $3600 if the psychologically important $3660 level gives way to the bulls. However, the RSI is in overbought territory, which could imply a pullback towards the descending trendline near $3400, with a break below the trendline’s last zigzag at $3320 invalidating the pattern.

Source: SpreadEx | Gold, spot