On the alert

There is no chance of the financial markets getting boring anytime soon. In particular, the constant flow of news about tariffs, counter-tariffs and their effects is keeping market participants on their toes. Initially, US President Trump suspended import tariffs on goods from Canada and Mexico that fall under the USCMA trade agreement until the beginning of April – an agreement he himself had concluded during his first term in office. However, this also means that customs duties on around half the imports from Canada will, for example, remain in place. Yesterday, Wednesday, the tariffs on aluminium and steel came into force, to be levied on all imports to the US without exception. For a few hours on Tuesday, Trump threatened to increase these tariffs to 50 percent for Canada but retracted in the evening.

Falling prices on the stock markets

The markets do not like uncertainty and the news on US trade policy seems to change by the hour. This has recently led to noticeable setbacks on the stock markets, especially in the US, where benchmark indexes are trading lower than at the beginning of the year, and the sell-off accelerated further early this week on Monday and Tuesday. While it would have been normal to expect the gold prices to benefit from this situation, they temporarily fell sharply. As is so often the case, this was due to major investors on the futures exchanges in particular selling out gold positions to offset losses on stocks. However, with last night’s stabilisation of US benchmark indexes, the gold prices quickly recovered their losses.

Demand for gold ETCs remains robust

Gold prices were recently supported by continued central bank purchases and robust demand for gold ETCs. February saw an inflow of US$9.4 billion into these products, the strongest demand since March 2022, the month immediately following the start of the Russia-Ukraine war. By contrast, speculative investors on the US futures exchanges reduced their purchase positions by around 16 per cent in February and are also likely to have reduced their positions somewhat at the beginning of this week.

The (geo)political uncertainties, discussions regarding the ever-increasing US and European national debt and the noticeable depreciation pressure on the US dollar continue to support the gold prices, which rebounded over the course of the week.

Last Thursday morning, gold traded at 2,920 US$ per ounce but dropped to 2,880 on Monday during the turbulent trading hours at the beginning of the week. By Tuesday evening, however, it had already regained its losses and was back to 2,920, from where it rose further to its weekly high of 2,947 in Asian trading last night. This morning, gold started the European trading day at 2,937 US$ per ounce.

Strong euro slows Xetra-Gold

The Xetra-Gold price, restrained by the robust rise of the euro against the US dollar,dropped from 86.90 € per gram last Thursday morning to 85.65 on Tuesday morning. It recovered to 86.60 yesterday afternoon and is likely to start trading somewhat firmer this morning at 86.75 € per gram.

Geo-, tariff- or fiscal policy decisions – such as the potential resolution on an infrastructure and defence “special fund” in Germany – should remain vital price determining factors in the short term. The next Fed meeting is coming up next Wednesday with an outlook for the coming months.

I wish all readers a pleasant spring weekend.