LME aluminium was steady this morning after Trump announced plans to impose 25% tariffs on all imports of steel and aluminium into the US. The US imports significant volumes of aluminium and steel from Canada. In 2023, net US aluminium imports were 44% of its total consumption, with Canada the biggest supplier, accounting for 56% of imports. Meanwhile, around 30% of steel imports into the US arrived from Canada. Only last week, Trump delayed plans to hit Canada and Mexico with general import duties of 25%.
With Trump back in the White House, uncertainty and unpredictability are running high. Prolonged trade conflict would slow global growth and hurt demand for industrial metals. In 2018, the US president imposed a 10% duty on imported aluminium and a 25% tariff on imported steel to promote domestic metal production. The duties on Canada and Mexico were lifted a year later after a new free trade agreement between the two countries and the US.
In precious metals, gold rose to a fresh record high following Trump’s new tariff announcement. Gold is already up more than 10% year-to-date, having hit a series of consecutive record highs along the way. Tariff concerns that risk higher inflation and slower economic growth are spurring demand for safe haven assets like gold.
Meanwhile, China’s central bank expanded its gold reserves for a third month in January. Gold held by the People’s Bank of China rose to 73.5 million troy ounces in January, from 73.3 million in the previous month. Last week, data from the World Gold Council (WGC) showed that central banks’ buying last year exceeded 1,000 tonnes for the third year in a row, accelerating sharply in the fourth quarter to 333 tonnes and bringing the net annual total to 1,045 tonnes. Gold’s rally in 2024 was driven by central bank buying, especially from China. Central banks are still buying and will probably continue to do so as geopolitical tensions and the economic climate continue to push them to increase their allocation towards safe haven assets.
The latest positioning data from the CFTC shows that speculators increased their net longs of COMEX copper by 1,674 to 17,197 lots as of 4 February. In precious metals, managed money net longs in COMEX gold decreased marginally by 366 lots for a second consecutive week to 230,226 lots over the last reporting week. The move was fuelled by rising gross long and gross shorts by 12,202 lots and 12,568 lots for the reporting week. In contrast, speculators increased net longs of silver by 11,052 lots to 37,370 lots (the highest since the last week of October) as of Tuesday, following an increase in gross longs by 10,178 lots to 57,040 lots.