Gold hits fresh record high and approaches $3000
Gold prices rose in European trade on Thursday and resumed the gains after a short hiatus, hitting a record high and approaching the historic barrier of $3000 on haven demand amid mounting trade concerns.
The gains are also underpinned by lower US 10-year treasury yields before crucial US labor data, which could provide clues on the Fed’s upcoming rate decisions.
Prices
Gold prices rose 0.75% today to $2954 an ounce, a record high, with a session-low at $2933.
On Wednesday, gold lost 0.1%, marking the first loss in three days on profit-taking away from recent record highs.
Trump’s Tariffs
US President Donald Trump announced plans to impose a 25% tariff on all car imports to bolster the US economy and reduce the trade deficit, with the tariffs expected to be implemented on April 2nd.
Itt comes ahead of anticipated talks between the European Trade Commissioner and Trump’s trade officials to discuss to avoid an all-out trade war.
Trump has previously threatened a 20% tariff on European car imports in 2018.
US Yields
US 10-year treasury yields fell 0.4% on Thursday, in turn pressuring the greenback.
The recently released Fed’s meeting minutes showed members are concerned about Trump’s economic plans and especially tariffs, and their impact on inflation.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut at the March meeting stood at just 2%.
SPDR
Gold holdings at the SPDR Gold Trust rose 8.04 tons yesterday to a total of 877.98 tons, the highest since January 17.
Euro resumes gains on ECB speculation
The euro rose in European trade on Thursday against a basket of major rivals, resuming gains after a three-day hiatus and on track for two-week highs on speculation about the upcoming European Central Bank’s meeting.
Recent bullish remarks from several ECB officials, in addition to data that showed eurozone inflation slowed down in January, both hurt the odds of an ECB interest rate cut at the March meeting.
The Price
The EUR/USD pair rose 0.15% today to $1.0437, with a session-low at $1.0418.
The EUR/USD pair fell 0.25% today, the third daily drop in a row away from a two-week high at $1.0514 on renewed concerns about Trump’s tariffs.
Bullish Remarks
The European Central Bank President Christine Lagarde said this week the bank requires more time to know for sure that inflation is heading steadily towards the 2% target, adding that rate cuts aren’t urgent for the time being.
European Central Bank member Isabel Schnabel said the bank can continue to cut borrowing costs in tandem with growing confidence that inflation is heading towards 2%.
However, she asserted the importance of caution, and noted that interest rates are approaching neutral levels.
European Rates
Following the remarks, the odds of an ECB interest rate cut in March dropped from 65% to 55%.
Now traders await more data and remarks by several ECB officials to gather more clues.
Yen expands gains to 10-month high on bullish remarks
The Japanese yen rose in Asian trade on Thursday against a basket of major rivals, expanding gains for the second straight session against the dollar and plumbing 10-week lows, while about to trade above $150 for the first time this year on strong investment demand.
Recent bullish remarks from some Bank of Japan officials bolstered the odds of a Japanese rate hike in March as traders await more data on inflation, unemployment, and wages.
The yen is also boosted by a slowdown in US 10-year treasury yields even as the recently released Fed minutes showed the Fed isn’t rushing to cut rates.
The Price
The USD/JPY pair fell 0.8% today to 150.30 yen per dollar, the lowest since December 9, with a session-high at 151.47.
The yen rose 0.4% on Wednesday against the dollar, marking the fourth profit in five days on the outlook of monetary policy normalization in Japan.
Bullish Remarks
Bank of Japan member Hajimi Takata asserted the importance of gradual interest rate hikes to contain the risks of inflation, which is approaching the 2% target.
BOJ Vice Governor Riyuzu Himuno said the path of monetary policies will depend on data, especially wages growth in both 2024 and 2025.
Japanese Rates
Recent data showed Japan’s GDP growth accelerated in the fourth quarter of last year, in turn raising pressures on BOJ policymakers.
Following the data, the odds of a BOJ March interest rate hike rose by 0.25% at the March meeting to 80%.
Now investors await more data on Japan’s inflation, unemployment, and wages before the BOJ March meeting.
US Yields
US 10-year treasury yields fell 0.4% on Thursday, in turn pressuring the greenback.
The recently released Fed’s meeting minutes showed members are concerned about Trump’s economic plans and especially tariffs, and their impact on inflation.
According to the Fedwatch tool, the odds of a Fed 0.25% interest rate cut at the March meeting stood at just 2%.
