Gold (GC=F) prices rose to a two-week high on Tuesday as renewed fears over US president Donald Trump's tariff plans boosted interest in the safe-haven metal.
Gold futures gained 1.6% to $3,377.40 per ounce at the time of writing, while the spot price rose 3% to $3,376.14 an ounce.
“We are seeing a continued flow of safe-haven demand, keeping gold prices elevated. Prices are going to trade above $3,000 level at least in the near-term,” Jim Wyckoff, senior analyst at Kitco Metals, told Reuters.
The rally in gold prices follows Trump’s announcement on Sunday of a 100% tariff on foreign films, a move that raised eyebrows and stoked fears of broader trade tensions.
The announcement, combined with Trump’s comments that no talks with China are planned for the coming week, has heightened concerns about the economic fallout from a potential global trade conflict.
The US president, however, suggested that he is open to reducing tariffs "at some point", leaving the door slightly open for future negotiations.
Market watchers are also closely eyeing the US Federal Reserve's upcoming interest rate decision and comments from Fed chair Jerome Powell on Wednesday, with investors looking for clues on the central bank’s monetary policy path.
Goldman Sachs (GS) analysts have predicted that the Fed will hold off on cuts for the time being but will likely announce three 25 basis point reductions in the coming months, in July, September, and October.
Nikos Tzabouras, senior market analyst at Tradu.com, said: "Fed officials will want to see evidence from labour market and other hard data before cutting. We think this will take a couple of months and therefore expect three 25bp cuts in July, September, and October," the investment bank said in a note.
“Gold rebounds from a losing week and gets back on track for new all-time highs. The uncertain trade environment is expected to persist, with negotiations yet to yield tangible results. Meanwhile, renewed geopolitical tensions are adding to market concerns, and continued weakness in the US dollar is providing further support for gold prices. On the other hand, tariff negativity may have peaked, and prospects of trade deals could lift sentiment and renew pressures on the precious metal.”
Gold, which provides a safeguard against political and financial instability, tends to thrive in low-interest-rate environments, further boosting its appeal as a safe-haven asset amid rising uncertainty.
The pound nudged higher against the dollar, rising 0.2% to $1.3322, as investors braced for the Bank of England’s upcoming interest rate decision later this week.
Markets widely expect the BoE to deliver a rate cut from 4.5% to 4.25% and potentially lay the groundwork for a second move in June, a scenario that could exert fresh pressure on sterling.
Governor Andrew Bailey has signalled that rate-setters believe tariffs are likely to weigh on UK economic activity. However, this will be the first time that policymakers address how Trump’s trade policies could affect inflation and the broader outlook for UK interest rates.
Investors think a quarter-point rate cut this week is now a near certainty, with the potential for one or two MPC members to break with the majority and vote for a bigger 0.5 percentage point cut.
Attention is also turning to the US Federal Reserve’s meeting on 7 May. The Fed, which has kept its policy rate steady in the 4.25% to 4.50% range since December, is expected to hold rates unchanged once again this week.
The dollar index (DX-Y.NYB), which measures the greenback against a basket of currencies, lost 0.2%, to $99.67.
Trump reiterated his call for Fed chair Jerome Powell to cut rates, telling NBC in an interview on Sunday that the decision not to do so was largely personal.
"Well, he should lower them. And at some point, he will. He'd rather not because he's not a fan of mine," Trump said.
Sterling was little changed against the euro, hovering just above the flatline at €1.1748. The single currency has pushed higher following the release of stronger-than-expected inflation figures from the Eurozone on Friday.
April’s flash consumer price index showed both headline and core readings coming in above forecasts, prompting a pullback in European Central Bank (ECB) rate cut expectations and lifting the euro.
Oil prices rose by 2% on Tuesday, recovering some of the losses from the previous session, when a decision by OPEC+ to accelerate production hikes sent prices tumbling.
Brent crude futures were up 2.3%, to trade at $61.60 a barrel, while West Texas Intermediate climbed 2.3%, hitting $58.41 a barrel.
Both benchmarks had settled at their lowest levels since February 2021 on Monday, as OPEC+ moved forward with plans to further accelerate oil production hikes for the second consecutive month.
“Today’s slight rebound in oil prices appears more technical than fundamental,” said Yeap Jun Rong, a market strategist at IG. “Persistent headwinds including a pivotal shift in OPEC+ production strategy, uncertain demand amid US tariff risks, and price forecast downgrades are continuing to weigh on the broader price movement.”
Barclays revised its Brent crude forecast on Monday, cutting its 2025 estimate by $4 to $70 per barrel and lowering its 2026 estimate to $62 per barrel. The bank cited a "rocky road ahead for fundamentals”, pointing to growing trade tensions and OPEC+’s shift in its production strategy as key factors influencing the outlook.
Goldman Sachs also adjusted its price forecast on Monday, lowering its outlook by $2 to $3 per barrel. The investment bank now anticipates an additional 400,000 barrels per day increase in OPEC+ production in July, further contributing to market uncertainty.
More broadly, the FTSE 100 was higher on Tuesday morning, up 0.2% to 8,618.18 points. For more details, check our live coverage here.
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