From geo to fiscal policy

We often hear and read that we live in fast-moving times. Rarely has this statement rung as true as in recent days and weeks: while geopolitical tensions in the Middle East were still the focus of attention last week and until Monday, the capital markets have since shifted their attention entirely back to US fiscal and trade policy, with the conflict in the Middle East currently regarded as de-escalated.

Current US fiscal policy issues:

• US President Trump wants the US Congress to pass the bill extending tax cuts and additional tax exemptions by Independence Day on 4 July, currently awaiting the Senate vote. Market players overwhelmingly predict that the bill would result in enormous tax losses inadequately funded, which could increase US government debt by several trillion US dollars in the medium term.
• The 90-day “tariff pause”’ announced by Trump in mid-April ends on 9 July. If no agreements are reached with trading partners by then or if the pause is not extended over the summer, the higher tariffs announced on 2 April would come back into force.
• Trump has recently reiterated his displeasure with Fed Governor Jerome Powell, who has so far shied away from cutting interest rates due to the current uncertainty surrounding the impact of tariffs on US inflation. A media report yesterday suggested that Trump may name a successor to Powell, whose term expires in May 2026, as early as September.

US dollar under pressure

This uncertainty increased pressure on the US dollar, which dropped to a three-and-a-half-year low against the euro yesterday. Gold prices initially rose as investors retreated to safe havens in the wake of the escalation in the Middle East but then came under pressure as the situation eased.

Gold in US dollars with slight weekly loss

Last Wednesday morning, the gold price stood at 3,385 US$ per ounce. Due to the US intervention in the Middle East conflict, it jumped from 3,370 to 3,395 at the start of trading on Monday morning. With Trump calling for a ceasefire between Israel and Iran, the status of gold as a safe haven took a nosedive, ending Tuesday at 3,295. After a quick recovery back above 3,300, gold is now trading sideways between 3,315 and 3,340 and started trading today at around 3,335 US$ per ounce.

Strong euro slows Xetra-Gold

The Xetra-Gold price was also slowed down slightly by the rise of the euro against the US dollar, initially rising from 94.40 € per gram last Wednesday morning to 95.00 in the afternoon. On Monday night, Trump called for a ceasefire, which was reflected in the Xetra-Gold price on Tuesday: it dropped to 91.30 but rebounded yesterday to 92.40. If the 8:00 price holds firm, Xetra-Gold will likely start trading at around 91.85 € per gram – this is due to the stronger euro, which rose to US$1.1717 per euro overnight.

In the coming days, the focus should remain on the US tax package and tariff policy. Monday marks the end of the first half of the year, which could bring further short-term price fluctuations. Next week also sees a host of economic data releases, including US labor market figures.

I wish all readers a sunny summer weekend.