Gold resumes gains near historic highs before Trump's new tariffs
Gold prices rose in European trade on Wednesday and resumed their gains after a short hiatus yesterday, approaching fresh record highs as investors await US President Donald Trump’s new tariffs later today.
Investors also await a batch of crucial US labor data this week, which will provide fresh pricing to the odds of a Fed rate cut in the first half of the year.
Prices
Gold prices rose 0.7% today to $3135 an ounce, with a session-low at $3107.
On Tuesday, gold lost 0.3%, the first loss in four days on profit-taking away from a record high at $3149.
Trump’s Tariffs
Trump is scheduled to announce new total and aggressive tariffs later today, aimed at all countries, which would reshape global trade and expand the scope of the trade war.
The tariffs will be applied immediately following Trump’s speech and aimed at any country that imposes tariffs on US products, with Trump calling it “Liberation day”.
US Rates
New York Fed President John Williams said that maintaining interest rates at current levels “for some time” would allow Fed officials to study incoming data and decide on the next steps.
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in May stood at 15%.
The odds of such a cut in June stood at a much stronger 75%, with investors now waiting for important US data this week to gather more clues, chief of which the payrolls report on Friday.
SPDR
Gold holdings at the SPDR Gold Trust fell 2.01 tons on Tuesday to a total of 931.37 tons, away from June 2023 highs at 933.38 tons.
Euro declines amid tense atompshere due to Trump's tariffs
Euro fell in European trade on Wednesday on track for the third loss in a row against the US dollar, amid a tense atmosphere before US President Donald Trump’s new reciprocal tariffs later today.
Trump will likely announce strict new tariffs on the EU, threatening economic and trade activities in the eurozone, and targeting vital industries such as cars and industrial products, which represent major portions of EU exports to the US.
The Price
The EUR/USD price fell 0.1% today to $1.0785, with a session-high at $1.0808.
The pair closed down 0.2% on Tuesday, the second loss in a row as eurozone inflation slow down in March.
Trump’s Tariffs
Trump is scheduled to announce new total and aggressive tariffs later today, aimed at all countries, which would reshape global trade and expand the scope of the trade war.
The tariffs will be applied immediately following Trump’s speech and aimed at any country that imposes tariffs on US products, with Trump calling it “Liberation day”.
It’s part of Trump’s America First strategy, which included 25% tariffs on imported steel and aluminum, then 25% tariffs on auto imports.
The tariffs were met with severe criticism from the EU, Canada, China, and other US trade partners, with some planning retaliatory tariffs on US products.
European Commission President Ursula von der Leyen said the EU is open to negotiate with the US on trade, but will respond strongly if needed.
ECB President Christine Lagarde said the prospect of US tariffs represents the start of an independence pathway for Europe.
European Rates
Recent data showed the eurozone inflation rates fell in March, reducing inflationary pressures on ECB policymakers.
Following the data, the odds of an ECB 0.25% rate cut in April fell from 43% to 48%.
Yen moves in a negative zone before US tariffs
The Japanese yen fell in Asian trade on Wednesday against a basket of major rivals, moving in a negative zone against the US dollar as investors shun big positions before US President Donald Trump’s tariff announcement later today.
The currency is additionally pressured by higher US 10-year treasury yields ahead of important US labor data this week.
The Price
The USD/JPY rose 0.25% today to 149.95 yen per dollar, with a session-low at 149.50.
The yen rose 0.25% on Tuesday against the dollar, the third profit in three days on haven demand.
Trump’s Tariffs
Trump is scheduled to announce new total and aggressive tariffs later today, aimed at all countries, which would reshape global trade and expand the scope of the trade war.
The tariffs will be applied immediately following Trump’s speech and aimed at any country that imposes tariffs on US products, with Trump calling it “Liberation day”.
It’s part of Trump’s America First strategy, which included 25% tariffs on imported steel and aluminum, then 25% tariffs on auto imports.
The tariffs were met with severe criticism from the EU, Canada, China, and other US trade partners, with some planning retaliatory tariffs on US products.
US Yields
US 10-year treasury yields rose 0.9% on Wednesday on track for the first profit in four sessions, moving away from four-week lows at 4.133% and underpinning the dollar.
It comes ahead of important US labor data, such as private sector employment data today, and the all important payrolls report on Friday.
The data will provide important clues on the flexibility of the US economy in the first quarter of the year, and will provide fresh pricing on the odds of a Fed rate cut in the first half of the year.
Oil reverses lower on trade war uncertainty
Oil prices fell on Tuesday and gave up earlier gains as markets monitor the escalating trade war between the US and other countries.
This week, OPEC+ is holding a ministerial meeting, with reports about a potential production hike of 135 thousand bpd in May after the bloc approved a similar hike in April.
Markets are on edge before US President Donald Trump’s new reciprocal tariffs. Details are limited, but Trump said almost all countries will face tariffs.
Otherwise, the Energy Information Administration will release its official report on US crude stocks tomorrow, expected to show a drop of 400 thousand barrels.
On trading, Brent June futures fell 0.35%, or 28 cents to $74.49 a barrel, after rising to $75.29.
US crude futures due in May fell 0.4% today, or 28 cents to $71.2 a barrel.