Trade tensions have escalated following the implementation of new U.S. tariffs on Mexican and Canadian imports, reaching 25%, alongside an increase in tariffs on Chinese goods to 20%. This move has created uncertainty in financial markets, as investors await key U.S. economic data, including the ISM Services PMI and ADP Employment Report, which may provide insights into the impact of these trade policies on the U.S. economy. Despite these measures, indications have emerged suggesting a possible reassessment of tariffs, as the U.S. Commerce Secretary stated that President Trump may reconsider his decisions in the coming days, adding further uncertainty to the economic landscape.
With tensions escalating between the United States and Ukraine after Washington decided to suspend military aid to Kyiv, gold purchases increased as a safe-haven asset. According to reports, all U.S. military shipments to Ukraine have been completely halted, including weapons in transit via aircraft and ships, as well as those stationed in transit areas in Poland. This development has heightened concerns over geopolitical stability in Europe. Meanwhile, despite the U.S. Dollar Index (DXY) dropping to 105.70, supported by rising U.S. Treasury yields, the economic pressure resulting from trade policies continues to pose risks to the future performance of the U.S. currency, which may provide additional support for gold prices in the coming periods.
Canada has announced retaliatory tariffs on U.S. imports, while China confirmed it will impose additional tariffs of up to 15% on key U.S. agricultural products. These escalating trade measures increase the risk of a global trade war, negatively affecting investor confidence in global markets. This growing pressure, combined with the significant decline in the ISM Manufacturing PMI to 50.3 points, reinforces concerns that these tariffs may adversely impact U.S. economic activity and weaken consumer spending.
Traders are now focused on the upcoming U.S. Non-Farm Payrolls (NFP) report on Friday, which could be a key factor in determining the dollar’s future trajectory. Any signs of weakness in the U.S. labor market could open the door for further dollar depreciation toward the 1.03 – 1.04 range in the coming months. On the other hand, gold remains a beneficiary of ongoing economic and geopolitical uncertainty, making it one of the assets that could see increased demand if trade and geopolitical tensions continue to escalate.
