Gold Market Takes a Hit
Gold prices took a tumble in today’s trading session (May 12th), with spot gold falling 1.4% to $3,277.68 per ounce. Gold futures in the US also dipped 1.9% to $3,281.40 per ounce.
Gold prices softened on Monday as optimism surrounding US-China trade talks eased market concerns, prompting a shift from safe-haven assets like gold to riskier investments.
Jigar Trivedi, a senior commodity analyst at Reliance Securities, commented, “The US dollar index rose as the Trump administration hailed progress in trade talks with China over the weekend. This put downward pressure on gold prices.”
Gold market continues its downward spiral.
After months of escalating tensions, the US and China concluded their trade negotiations on Sunday with positive signals. US officials described it as a “deal” to narrow the trade deficit, while China spoke of “significant consensus” being reached.
Gold tends to flourish in times of economic, political, and low-interest rate environments. However, the current factors are undermining the safe-haven appeal of the precious metal.
Beth Hammack, President of the Federal Reserve Bank of Cleveland, stated on Friday that the US central bank needs more time to assess the economy’s response to existing policies and tariffs before making any monetary policy adjustments.
The market’s attention now turns to the upcoming release of US consumer price index (CPI) data on Tuesday, which will provide further insights into the Fed’s interest rate outlook.
“In the near term, gold prices could remain under pressure due to a stronger US dollar and reduced safe-haven demand as geopolitical risks subside. The next support level for gold is expected to be around $3,200 per ounce,” added Trivedi.
Silver held steady at $32.70 per ounce, while platinum rose 0.3% to $998.04 per ounce, and palladium climbed 0.4% to $979.73 per ounce.
In the energy market, Brent crude oil rose 29 cents to $64.20 a barrel, while US crude oil gained 30 cents to $61.32 a barrel. Oil prices climbed as trade negotiations are expected to reduce the risk of an economic downturn.
Stock Markets Show Signs of Recovery
Wall Street stock futures advanced in Monday’s trading session, and the US dollar strengthened against safe-haven currencies as investors grew optimistic about the progress in US-China trade talks.
Michael Brown, a senior market analyst at Pepperstone, remarked, “It appears we have a broader framework for the two countries to continue negotiations toward a comprehensive trade deal.” However, he noted that the current progress isn’t clear enough to determine if any tariffs will be paused, reduced, or eliminated.
Investors are hopeful for an early reduction in import tariffs from the current 145% to 60%, as promised by President Trump. However, Trump maintains a tough stance on tariffs, which could pressure growth and drive up prices.
US-China trade talks show positive signs.
Reacting to the positive signals, S&P 500 futures rose 1.2%, and Nasdaq futures climbed 1.4%. The EUROSTOXX 50 gained 0.9%, the FTSE rose 0.4%, and the DAX advanced 0.7%.
In Asia, Japan’s Nikkei 225 index added 0.3%, and South Korea’s Kospi increased by 0.4%. China’s CSI300 index rose 0.8%, despite weak data showing house prices falling in April at the fastest pace in six months, while consumer prices dropped for the third consecutive month.
In the currency market, the US dollar climbed 0.4% against the Japanese yen to 145.90 yen, pulling back slightly from a high of 146.31. The euro slipped 0.2% to $1.1224.
The US dollar index rose 0.2% to 100.60. The dollar softened 0.2% against the Chinese yuan in offshore trading to 7.2278, moving closer to last week’s low of 7.1846.
Expectations for a Federal Reserve rate cut continue to be tempered. April’s consumer price data, due this week, could offer an early indication of the impact of import tariffs on inflation. Retail sales are expected to be flat for April after surging ahead of the tariffs.
Investors are also awaiting Walmart’s (WMT.N) earnings report on Thursday to gauge the actual impact on consumer spending, especially for goods sourced from China.
Analysts at ANZ predicted, “It will take until the May CPI data is released for us to see the full impact of the tariffs on inflation. June is too soon for the Fed to act. Q3, specifically September, is more realistic.”
The market has adjusted its expectations for a Fed rate cut. The probability of a June cut has fallen to 17% from over 60% a month ago, while the likelihood for July stands at 59%. This week, several Fed officials will speak, led by Chairman Jerome Powell on Thursday.
Source: Reuters
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