Tariff week

Few weeks in the year are as sparse on economic data as the current one, with virtually no data of any relevance to the financial markets. The week promises more excitement in terms of US trade and tariff policy. After US President Donald Trump signed his ‘One Big Beautiful Bill’ tax reform last Friday, the financial markets quickly turned their attention to the tariff issue yesterday (Wednesday). Trump had declared a ‘tariff pause’ until 9 July with the intention of reaching trade agreements with trading partners by then. So far, this has only been achieved with the United Kingdom, Vietnam and, to some extent, China. Nevertheless, unlike around 20 other countries, the European Union, for example, has not yet been informed of increased tariffs that are to come into force on 1 August unless a deal is reached by then. This was received with relief on the financial markets, although no concrete agreements have yet been reached between the EU and the US.

Markets remain calm

The announcement of 50 per cent import duties on copper into the US also caused copper prices on the US Comex exchange to rise to record levels (a daily gain of 17 per cent, which meant that copper was trading at a premium of 25 per cent in New York compared to London) but did not dampen the markets’ risk appetite. Most market participants seem to assume that sufficient agreements will be reached with most countries by 1 August to prevent the tariffs from coming into force at the planned level – we will see if this turns out to be true.

Benchmark indices reach record highs

This growing optimism is reflected in the fact that the DAX, the S&P 500 and the Nasdaq Composite in the US all climbed to new all-time highs. It should also be noted that US labor market data at the end of last week was slightly above expectations. This, in turn, caused gold to be less sought after, with prices coming under some pressure over the course of the week. 

Gold prices slightly weaker

Last Thursday morning, gold traded at 3,360 US$ per ounce, turning south briefly on Monday, Tuesday and Wednesday of this week to a low of 3,283 on Wednesday, but recovering to above 3,300 by the end of each day. Gold opened today’s trading at around 3,325 US$ per ounce. Xetra-Gold developed along similar lines, dropping from 91.60 € per gram last Thursday morning to 90.15 yesterday morning, then recovering to 90.95 in the afternoon. If the price at 8:00 holds, Xetra-Gold is likely to start trading at around 91.10 € per gram this morning.

The focus should remain on US tariff policy. Trump has announced that further tariff announcements may be issued today. Next Tuesday’s US consumer price data is likely important in terms of speculation about the Fed’s future monetary policy. 

I wish all readers a sunny weekend a great vacation to anyone kicking off their summer holidays.