Gold resumes gains near record highs
Gold prices rose in European trade on Monday, resuming the gains after a short hiatus on Friday and approaching record highs once more on haven demand due to concerns about Trump’s tariffs.
Prices are also boosted by current weakness in US 10-year treasury yields as traders await more data and remarks by Fed officials to gather clues on the path ahead for monetary policies.
Prices
Gold prices rose 0.45% today to $2948 an ounce, with a session-low at $2921.
On Friday, gold lost 0.1%, moving away from a record high at $2954.
The precious metal rose 1.9% last week, marking the eighth weekly profit in a row, and the longest such streak of weekly gains since June 2020.
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.
It 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 0.25% on Monday on track for the fourth loss in a row, trading near two-week lows at 4.406% and boosting non-yielding assets.
It comes after data showed a surprise contraction in the US services sector in February in another sign of economic slowdown in the first quarter.
US Rates
According to the Fedwatch tool, the odds of a Fed March interest rate cut stood at just 2.5%.
Bow investors await crucial US GDP and consumer spending data later this week, in addition to speeches by several Fed officials.
SPDR
Gold holdings at the SPDR Gold Trust rose by 20.66 tons on Friday to a total of 904.38 tons, the highest since August 2023.
Euro rushes to one-month high as Conservatives win German elections
Euro rallied in European trade on Monday against a basket of major rivals, resuming gains against the dollar and hitting a month high after Conservatives won the German elections as expected.
The Conservatives leader Friedrich Merz, set to become the next German chancellor, announced plans to form a coalition government as soon as possible to face the ongoing international challenges.
The Price
The EUR/USD pair rose 0.7% today to $1.0528, the highest since January 27, with a session-low at $1.0456.
The pair closed down 0.4% on Friday on risk aversion before German elections.
German Elections
Initial results showed the Conservative Party won the elections and got first place, followed by the far-right Alternative for Germany party in second place as expected.
The Conservatives got 28.52% of the vote in first place, followed by the AFD party at 20.8% of the total vote.
The Socialist Democratic Party fell to third place at 16.41%, its worst election result since 1949.
A New Coalition
German Chancellor Olaz Shultz conceded his defeat, while Friedrich Merz announced urgent plans to form a coalition as soon as possible.
The markets were relieved with the results, as they matched expectations very closely with no surprises.
Investors expect the upcoming centrist government to support business-friendly policies and boost investments even further.
Yen hits 12-week high on Japanese rates outlook
The yen rose in Asian trade on Monday on track for the fourth straight profit against the dollar, hitting a 12-week high on strong investment demand.
Inflationary pressures are mounting in Japan with analysts expecting the Bank of Japan to hike interest rates in March.
Prices
The USD/JPY pair fell 0.2% today to 148.84 yen per dollar, the lowest since December 3, with a session-high at 149.49.
The yen rose 0.3% against the dollar on Friday following hot Japanese inflation data.
The yen rallied 2% against the dollar last week, marking the fifth weekly profit in six weeks on hopes for a reduction in the Japan-US yield gap.
Japanese Rates
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.
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%.
Dow Jones tumbles 750 basis points, marking worst weekly loss since October
US stock indices lost ground on Friday amid concerns about the trade war, with the losses widened after negative data that showed US consumer confidence tumbled to 15-month lows in February.
Earlier data from S&P Global showed the US services PMI tumbled to 49.7 in February from 52.9 in January, the first contraction in two years.
Conversely, the US manufacturing PMI edged up to 51.6 in February from 51.2 in January, beating estimates of 51.5.
The combined PMI fell to a 17-month low at 50.4, but still held above the 50 barrier.
Separately, the Michigan consumer confidence index fell 10% m/m to 64.7 in February from January’s 71.7.
The recently released Federal Reserve’s meeting minutes concerns among members about US President Trump’s new tariffs and their impact on inflation, in addition to the policies about tax cuts and immigration.
Fed members considered the possibility of factors impeding further progress in bringing inflation towards 2%, including tariff and immigration policies.
Dow Jones was down 1.7% at the close, or 748 points at 43,428 points, with a session-low at 43,349 points.
S&P 500 fell 1.7%, or 104 points to 6013 points, with a session-low at 6008 points.
NASDAQ shed 2.2%, or 438 points to 19,524 points, with a session-low at 19,511 points.