Gold futures soared to an all-time high of US$3,534.10 per ounce on Friday after reports that the Trump administration was moving to impose tariffs on certain gold bars. But the precious metal, which has been on a tear in recent months, came off those highs later in the day, when the White House said a clarification regarding “misinformation” about a bullion tariff would be forthcoming. Here’s how things played out throughout the day and where they stand now.

What happened?

Gold prices surged on Thursday after a letter from the U.S. Customs Border Protection Agency was published, suggesting that levies would be imposed on one-kilo and 100-ounce gold bars because of the “reciprocal tariffs” that Trump announced earlier this year. The

letter, dated July31, was in response to a request sent by a U.S. firm that wanted clarification on the tariff classification for gold bars from Switzerland.

Numerous media organizations picked up the story on Friday after it was first reported Thursday by the Financial Times. The news surprised gold investors, and gold futures rose to an all-time high on Friday morning, before cooling down a bit in the afternoon.

Why would Trump place levies on gold bars?

Speculation about the reason for the tariff was rife. Some industry insiders said that the latest move reflected the Trump administration’s playbook of placing a tariff on anything he wanted to control. Others said that the move could be linked to Trump trying to pressure Switzerland into a deal.

Switzerland is the world’s largest gold refiner with up to 70 per cent of the world’s gold melted and processed there. Trump has imposed a 39 per cent tariff on the European nation, which is the highest he has imposed among developed countries. The country’s gold industry has already warned that the tariffs could severely impact the sector.

But the speculation appeared to be moot later in the afternoon, when the Trump administration said that it would issue a new policy that would state that the imports of gold bars should not face tariffs.

The White House said it intends to post an executive order in the near future to clarify what an official called “misinformation” about the tariffing of gold and other specialty products, Bloomberg reported. 

Why have gold prices been rising more generally?

Traditionally, gold has been viewed as a store of value or safe investment. It’s an asset people generally turn to when the stock market isn’t doing well or when they are unsure about the economy because gold manages to maintain its value.

The spot price of gold has grown by more than 40 per cent in the last year and about 20 per cent in the last six months.

But that doesn’t mean gold is immune from market pressures. Like every other metal, it has cycles. For example, gold lost more than a quarter of its value between October 2012 and July 2013. Analysts then attributed the fall to factors such as a positive stock market and a recovering United States economy.

Factors such as the general risk sentiment, high interest rates and the price of the U.S. dollar has contributed to the rise. Many analysts say the current rise in gold prices can be attributed to increased purchases by central banks, particularly the People’s Bank of China, which is often seen as a preemptive defensive action to preserve economic independence as geopolitical turbulence rises.

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Tariffs on gold bars would potentially help continue that good run and push gold higher, industry insiders say.

What comes next?

The United States is the largest owner of physical gold in the world and some analysts have suggested it might want a higher gold price. For instance, if the price of gold were to reach around US$4,000 an ounce, it would provide a gain of more than US$1 trillion in benefit to the U.S. Treasury, industry insiders say.