Reasons for the rise in gold prices in 2025: tariff uncertainty and weak US inflation data

On Wednesday (March 12, 2025), the uncertainty of tariffs and the cooling inflation report kept the bet of a US interest rate cut unchanged, and as a safe haven tool, gold prices continued to rise.

In late trading in New York, spot gold closed up 0.60% at $2933.24 per ounce. After the release of the US CPI inflation index at 20:30 Beijing time, it turned lower. At 21:25 (shortly before the US stock market opened), it hit a new daily low of $2906.23 per ounce, then quickly rebounded and hit a new daily high of $2940.60 per ounce at 01:46. COMEX gold futures rose 0.72% to $2941.80 per ounce, and continued to fluctuate narrowly within the $2920 per ounce range until 22:00. The overall trading range for the day was $2911.00-2948.90 per ounce. Spot silver rose 0.82% to $33.2136 per ounce. COMEX silver futures rose 1.64% to $33.690 per ounce. COMEX copper futures rose 1.10% to $4.8465 per pound.

Bart Melek, head of commodity strategy at TD Securities, said, "People are still concerned that we will impose tariffs, which may ultimately lead to some inflation.

The data released by the US Department of Labor on the 12th showed that the US Consumer Price Index (CPI) rose by 0.2% month on month and 2.8% year-on-year in February this year, and egg prices rose by 10.4% month on month and 58.8% year-on-year, indicating that the shortage of eggs in the United States has not yet eased. Data shows that after excluding volatile food and energy prices, the core CPI in February increased by 0.2% month on month and 3.1% year-on-year, far exceeding the long-term target of 2% set by the Federal Reserve of the United States.

Steven Blitz, Chief US Economist at TS Lombard, stated that inflation data does not provide a signal for the Federal Reserve to cut interest rates. Despite the CPI dropping from 3% to 2.8% in February, "the anomalies in the data are enough to raise doubts about any attempt to view it as a trend," Blitz said. Excluding food and energy, commodity prices showed a seasonally adjusted annual growth rate of 2.7% in February, an improvement from January's 3.5%, but still unstable. He stated that this is the category where the impact of tariffs was most evident in the first round. Ultimately, as the employment rate continues to rise, inflation will also increase accordingly.

The increase in the US Consumer Price Index (CPI) in February was lower than expected, but Chris Zaccarelli, Chief Investment Officer of Northlight Asset Management, believes that this improvement may be temporary in the context of aggressive tariffs on imported goods, and it is expected that the cost of most goods will rise in the coming months. Zaccarelli said, "This morning, the market hit by tariffs will breathe a sigh of relief because higher inflation is the only thing that could make the situation worse. With inflation data below expectations (quarter on quarter and year-on-year), at least the Federal Reserve still has the flexibility to intervene to support the weak economy, which is good news for the market as it has experienced turbulence in the past month and a half." Zaccarelli said that although the CPI rise in February was mild, the cost of most US goods will rise in the coming months due to the impact of the tariff war.

The US dollar index, which measures the US dollar against six major currencies, rose 0.31% on the day and closed at 103.612 at the end of the foreign exchange market.

The decrease in US inflation rate may give the Federal Reserve more room to cut interest rates.

Last year, the Federal Reserve lowered interest rates by 100 basis points. The financial market expects that due to the deteriorating economic outlook, the Federal Reserve will resume interest rate cuts in June after suspending them in January.

Non yielding gold thrives in a low interest environment and is considered a safe investment during periods of economic and geopolitical turbulence.

The US Producer Price Index (PPI) and weekly unemployment claims data released on Thursday are the next dataset that investors are paying attention to.

In terms of trade policy, Trump's tariffs on all US steel and aluminum imports came into effect on Wednesday, strengthening a global trade restructuring movement favorable to the United States and quickly facing counterattacks from Europe.