Gold Price Gains as '899 Revenge Tax' Hits US Dollar Assets
Wednesday, 6/04/2025 15:29
GOLD PRICES rose on Wednesday, trading at what were new all-time records just 6 weeks ago as US stock markets kept lagging global equities and the Dollar fell again amid fears that global capital will dump US assets, including Treasury bonds, thanks to President Trump's 'Revenge Tax' on foreign investors.
Buried in
Trump's "one big beautiful" tax and spending bill − now lambasted as
a "disgusting abomination" by key Trump supporter and former 'government efficiency' czar, billionaire tech CEO Elon Musk − clause 899 would enable Washington to levy a charge of 5% to 20% on US profits and income made by investors based in countries accused of hitting US companies with "discriminatory" taxes.
Now being rushed through the Senate for approval before July 4th, Trump's 'Revenge Tax' could see the Dollar dive 5%, reckons German multinational financial services giant Allianz's chief investment officer Ludovic Subran.
The Dollar today traded near a 2-year low on Bloomberg's index of developed and emerging-market currencies.
Trading in gold meantime took the precious metal up $20 towards $3375 per Troy ounce, less than $20 below Monday evening's 4-week high but still $125 off mid-April's record peak.
New York's stock markets opened the day 0.3% higher, while Asia closed with a 0.6% gain and European bourses traded 0.5% higher, extending the outperformance of non-US equities worldwide to more than 12 percentage points in 2025 to date.
Gold has done more than twice as well, however.
New data today said the US economy added only 37,000 jobs in May, the weakest growth since March 2023 and more than two-thirds below Wall Street forecasts for the ADP Payrolls estimate.
Friday will bring the Bureau of Labor Statistics' official non-farm payrolls number, a
key point of trading volatility in gold and US Dollar assets.
"ADP NUMBER OUT!!!" tweeted Trump on the TruthSocial platform he owns.
"'Too Late' Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES!" the President went on, renewing
the White House's attack on the Federal Reserve chairman he himself appointed in 2019.
Two of Trump's 3 policy aims have now been achieved, says a note from gold-market strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, with lower rates "the last shoe to drop" as the Dollar weakens and energy prices fall.
The European Central Bank will cut Eurozone interest rates yet again this Thursday, consensus forecasts say, after consumer-price inflation across the 20-nation currency union slowed to 1.9% per year in May, one tick beneath expectations.
US economic growth will slow by two-fifths in 2025 to 1.6% says Paris-based think tank and policy forum the OECD in its latest updates.
But current data say GDP growth is running at 4.6% annualized in the April-to-June quarter according to the Atlanta Fed's GDPNow estimates.
"Because of Tariffs, our Economy is BOOMING!" tweeted Trump earlier today, just before the monthly ISM survey of services businesses said the sector suffered falling activity and orders in May, but with prices paid rising sharply.
That slowdown saw the price of US Treasury bonds rally from yesterday's 1-week low, edging the federal government's 10-year borrowings costs down below 4.40% per annum for the first time in almost a month.
"America is becoming less attractive to global investors at a time when the government's dire and deteriorating fiscal position needs them more than ever," says Bill Dudley, former president of the New York Fed.
"If American stocks and bonds are made riskier and more expensive, it behooves foreign investors to take money home," says Bloomberg columnist John Authers.
But with the US Dollar remaining the world's No.1 central-bank reserve, business invoicing and financial trading currency, "Demand for reserve assets leads to significant currency overvaluation with real economic consequences," claimed the 'Mar-a-Lago Plan' laid out by wealth manager Stephen Miran, now chairman of Trump's Council of Economic Advisers, rehashing
long-standing arguments for weakening the Dollar's reserve currency status in his 'User’s Guide to Restructuring the Global Trading System' published last November.
Central banks as a group continued to buy gold in April, official data says, but at a slower pace for the 2nd month running as the precious metal
raced to a gold peak of $3500 per ounce.
"Gold's rally to multiple record highs is unlikely to deter central banks from buying," says senior analyst Krishan Gopaul at the mining industry's World Gold Council, because "they
tend to be more strategic in nature. [But] it could explain some of the deceleration."
"Despite the slowdown in purchases," say commodities strategists Warren Patterson and Ewa Manthey at Dutch bank ING, "central banks are likely to continue to add gold to their reserves, given the uncertain economic environment and the efforts to diversify away from the US Dollar."
Like gold prices, silver also held firm on Wednesday, fixing above $34 per Troy ounce for the 2nd day running at London's midday benchmarking auction.
Silver topped the $34 level on 4 days in March and 6 times last October, when it marked a 12-year high.
Email us
