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The signing of a reciprocal tariff order has injected further uncertainty into global trade. The potential for escalating trade tensions increases investor nervousness, prompting a flight to safe-haven assets.
Gold prices have surged, approaching record highs, driven by a confluence of factors including US dollar weakness, trade anxieties, and robust central bank demand. The yellow metal’s climb reflects its traditional safe-haven appeal in times of economic uncertainty.
The US Dollar Index has fallen to around 107.20, its lowest point in two weeks. This drop coincides with declining US yields across the yield curve. Upcoming US economic data, including Retail Sales, Industrial and Manufacturing Production, Business Inventories, and Export/Import Prices, will be closely watched for further clues about the dollar’s trajectory. These indicators will provide insights into the strength of the US economy and the potential impact of ongoing inflation and trade tensions.
Euro and Pound Strengthen Against Dollar
The euro has capitalized on the dollar’s weakness, rising above 1.0400 to reach two-week highs near 1.0450. Upcoming data releases for the Eurozone, such as German Wholesale Prices, EMU Employment Change, and Q4 GDP Growth Rate, along with the European Commission’s Winter Forecasts, will provide a clearer picture of the Eurozone’s economic health. The British pound has also benefited from the dollar’s decline, approaching multi-week highs near 1.2550. This surge reflects improved sentiment towards risk assets, further contributing to the dollar’s depreciation.
Concurrently, US Treasury yields have also fallen, further supporting gold’s upward trajectory. Lower yields reduce the opportunity cost of holding non-yielding assets like gold. The 10-year Treasury bond yield, for example, has seen a significant decrease. The inverse relationship between real yields and gold prices adds to this upward pressure.
Yen and Aussie Dollar Gain Ground
The Japanese yen has also strengthened against the dollar, retreating from recent highs near 154.80. The upcoming weekly Foreign Bond Investment figures will be of interest to yen traders. The Australian dollar has likewise advanced, surpassing the key resistance level of 0.6300. This rise is attributed to the bearish sentiment surrounding the US dollar.
Commodities React to Geopolitical Developments
WTI crude oil prices have declined, briefly dipping to two-month lows near $70.00 per barrel. This drop is attributed to potential ceasefire talks in the Russia-Ukraine war, which could alleviate concerns about energy supply disruptions. Gold prices, on the other hand, have rebounded, exceeding $2,900 per ounce. 1 This increase suggests a potential flight to safety amid global uncertainties.
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