Donald Trump’s Tariff Announcement Continues to Impact Markets
As the new week begins, the financial markets are still feeling the effects of President Donald Trump’s recent announcement of a 25% tariff on steel and aluminum imports to the US. This move has caused market gaps and increased risk aversion among investors, leading to a surge in safe haven assets.
Key Points on Tariff Pledges
President Trump is set to sign the tariff order on Monday or Tuesday, potentially sparking a trade war with multiple countries. The 25% tariff on steel and aluminum imports is just the beginning, as more tariffs are expected to follow later this week to match those imposed by other nations. Trade partners are already warning of retaliatory measures in response to Trump’s actions.
During his first term, Trump introduced tariffs on steel and aluminum, with exemptions for countries like Canada, Mexico, and Australia. Subsequent agreements with Brazil, South Korea, and Argentina allowed certain amounts of these metals to be imported duty-free. President Biden continued this trend with agreements with Britain, Japan, and the EU.
Gold Market Report and ETF Flows
Gold has seen a strong start to the year, with January delivering gains of 6.6% for the precious metal. Safe haven flows have remained robust, supporting gold prices in the face of market uncertainty. The World Gold Council’s report for January highlighted positive factors contributing to gold’s rise, including geopolitical risks and ETF inflows.
Global gold ETFs have seen increased inflows, particularly in Europe, while North America experienced outflows. Total AUM for gold ETFs has risen to US$294bn, with expectations of further growth in 2025. Many analysts are revising their gold price forecasts, with $3000/oz now seen as a realistic target.
Impact of US CPI Data
This week, all eyes are on US inflation data, which could influence gold prices. Despite recent upticks in inflation expectations, the full impact of tariffs on the US economy is yet to be felt. Any significant increase in inflation could lead to lower gold prices, but it may also drive demand for safe haven assets, balancing out the market dynamics.
Technical Analysis on Gold (XAU/USD)
From a technical standpoint, gold prices have surpassed $2900/oz and remain in overbought territory. Immediate support levels are around 2886, with potential resistance at 2911. Further upside targets include 2925, 2950, and 2975, while pullbacks could find support at 2870 and 2850.
Overall, the uncertainty surrounding Trump’s tariff announcements continues to drive market volatility and investor behavior. Understanding the implications of these tariffs on various sectors and assets is crucial for making informed investment decisions in the current economic climate.