Gold Eyes Breakout as Trade War Rhetoric, Bond Jitters Resurrect Safe-Haven Bid
LONDON (June 2) Glod finished the month of May flat as a pancake, but don’t take that as a sign of weakness. Investors have been piling into the yellow precious metals in the preceding months quite significantly as the trade war uncertainty added to years of high inflation eroding the value of fiat currencies, while rising debt levels among major developed economies, not least the US and Japan, have fuelled fears of a major economic shock.
In May, optimism about trade deals prevented the precious metal from breaking out to new highs despite further weakness for the US dollar. But trade uncertainty has now come back to the forefront, and so we could potentially see fresh gains for the yellow metal soon, with potential for sharp gains this week, especially if the US and Japan bond market selling continues.
Risk Assets Could Be Bracing for a Bumpy June Amid Trade Uncertainty
The S&P 500 ended Friday going nowhere fast, flat, in fact. But just as investors were exhaling after a strong May, late Friday saw Donald Trump drop a fresh dose of market stress. Post-close on Friday, the US President announced plans to double tariffs on steel and aluminium—from 25% to 50%.
Now, let’s not forget: May was no slouch. Global equities had their best month since November 2023, with markets rallying on the belief that the worst of the US tariff threats had passed. Risk assets were back in favour. But that relief rally may be short-lived, and June is already setting up to be a tricky month.
The return of trade war chatter is one thing, but there’s also the spectre of bond market turbulence as US lawmakers enter the ring to hash out a massive tax and spending package.
All this while the debt ceiling deadline looms and concerns about runaway government debt grow louder.
Put simply, volatility could easily make a comeback, and this puts gold in pole position to outshine everything else again.
ECB and NFP Among Week’s Traditional Macro (BCBA:BMAm) Highlights
It’s shaping up to be a big week on both sides of the Atlantic. The European Central Bank is widely expected to cut rates by 25 basis points on Thursday, June 5—a move that’s been telegraphed for weeks amid cooling inflation. But it’s not just about the rate cut anymore. Markets will be hanging onto every word of Christine Lagarde’s press conference for hints about what’s next.
Will the ECB ease further this summer, or take a breather and watch how the data evolves? A cautious, wait-and-see tone wouldn’t be surprising.
Over in the US, the macro calendar is packed. The spotlight is on Friday’s non-farm payrolls report for April, dropping June 6. With Fed policy still very much data-dependent, this jobs report could tip the scales. Traders will also be watching to see if trade war jitters are starting to seep into the labour market. We’ve already seen softer consumer sentiment and weaker GDP consumption components lately, so this will be another critical piece of the puzzle.
Before that, we’ll also get JOLTS job openings and both ISM PMIs—more breadcrumbs for the market to follow. All in all, it’s a pivotal week for both euro and dollar watchers, but one that could also impact gold prices.
Investing.com
