Gold loses lustre as US-Japan deal curbs safe-haven demand

Yahoo

4 days ago

Gold (GC=F)
Gold prices were lower in early European trading, as safe-haven demand took a hit after US president Donald Trump announced a trade deal with Japan ahead of an impending tariff deadline.
Gold futures were down 0.3% to $3,434.50 per ounce, at the time of writing, while spot gold was muted at $3,422.89 per ounce.
Trump struck a trade deal with Japan that lowers tariffs on car imports and saves Tokyo from punishing new levies on other goods in exchange for a $550bn (£406.5bn) package of US-bound investment and loans. The deal includes reduced 15% tariffs for car exports to the US, down from the previous 25%.
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"If further trade deals are signed ahead of 1 August, this could further boost general risk appetite and reduce the demand for gold," CM Trade chief market analyst Tim Waterer said.
"But if the USD remains pressured this will keep a return to $3,500 a viable near-term prospect for the precious metal."
Oil (BZ=F, CL=F)
Oil prices were lower this Wednesday morning, making it the fourth consecutive session of losses for crude, although the US tariff deal with Japan improved global trade sentiment and limited further sliding.
Brent (BZ=F) crude futures slipped 0.1% to trade at $68.49 per barrel, at the time of writing, while West Texas Intermediate (CL=F) futures retreated 0.2% to $65.20 a barrel.
"The slide of the past three sessions appears to have abated but I don't expect much of an upward impetus from news of the US-Japan trade deal as the hurdles and delays being reported in talks with the EU and China will remain a drag on sentiment," Vandana Hari, founder of oil market analysis provider Vanda Insights, told Reuters.
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Separately, US crude and gasoline stocks fell last week, market sources said, citing American Petroleum Institute figures on Tuesday. Distillate stocks rose by 3.48 million barrels, they added.
"This will offer some relief to the middle distillate market, which has been looking increasingly tight," ING analysts wrote in a note, adding that low crude inventories will offer some support to prices even as a large surplus is expected to hit the market later in the year.
Pound (GBPUSD=X, GBPEUR=X)
The pound was steady against the dollar, up 0.1% to trade at $1.3546, with fear of tax rises in the autumn capping further gains.
The latest UK government borrowing figures has increased concerns over tax hikes in the autumn as well as unsettling the bond market which has hit the pound in global markets.
"That GBP risk premium is partly because of the euro's idiosyncratic strength (due to its appeal as a reserve currency) but may also embed some UK budget concerns. Those were fuelled further this morning as the UK unveiled larger borrowing for June than expected by the UK fiscal watchdog," analysts at ING wrote.
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Capital Economics UK economist Alex Kerr, said: 'The government's U-turns on spending cuts and potential upward revisions to the OBR's borrowing forecasts means the chancellor will probably need to raise £15-25bn at the autumn budget to maintain the £9.9bn of headroom against her fiscal mandate.'
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, was muted at 97.40.
Elsewhere in currencies, the pound pushed higher against the euro. Sterling was up 0.2% against the single currency to trade at €1.1538 at the time of writing.
In equities, the FTSE 100 (^FTSE) hit a new record high of 9,057.61 this morning. For more details, on market movements check our live coverage here.