Yesterday’s announcement by President Trump that a 10% tariff is to be levied on $300bn worth of Chinese goods came as a shock after reports of “constructive” trade talks between the US and China earlier in the week. While rising protectionism has negative implications for global growth and commodities demand generally, the industrial metals look particularly vulnerable as the latest tariffs target many metals-intensive sectors.
US rate expectations plummeted in the wake of the tariff news, fanning the flames of the ongoing rally in the gold price. However, a solid US employment report, released on Friday, suggests that markets may be pricing in too much Fed easing. We continue to expect the price of gold to end the year at around $1,400 per ounce as markets revise down their expectations for cuts in the Fed Funds Rate.
Turning to next week, prices could rebound a little as the dust settles on the trade news. That said, China’s trade data on Thursday are likely to show subdued commodities import demand, which could add to the downward pressure on industrial metals prices, in particular.
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