Gold extends losses as U.S. and EU close in on tariff deal; silver rallies
Spot gold was down 1.2% at $3,389.09 per ounce, as of 12:45 p.m. ET (1645 GMT), after hitting its highest point since June 16 earlier in the day.
U.S. gold futures also slipped 1.3% to $3,399.90.
"So we're seeing a trade deal with Japan and looking at one with the EU. Ultimately, it means no major retaliatory tariffs from the EU, which has supported risk appetite...equity markets are doing pretty well," said Bart Melek, head of commodity strategies at TD Securities.
The European Union and the United States are moving toward a trade deal that would impose a broad 15% tariff on EU goods imported into the U.S., two diplomats said on Wednesday.
This comes as U.S. President Donald Trump also reached a trade deal with Japan on the same day to lower tariffs on auto imports, offering a welcome sign of progress in his broader tariff negotiations on multiple fronts.
Bullion tends to thrive in periods of uncertainty and also in low-interest-rate environments because the opportunity cost of holding a non-yielding asset is reduced.
The markets do not expect an interest rate cut from the U.S. Federal Reserve in July, but the Fed's independence appears under threat from mounting political interference, according to a clear majority of economists polled by Reuters.
Among other metals, spot silver fell 0.2% to $39.19 per ounce, after hitting a near 14-year peak, earlier in the session.
"The recent rally in silver is being driven by a combination of strong industrial demand, persistent supply deficits, and increased investor interest," said Alexander Zumpfe, a precious metals trader at Heraeus Metals Germany.
"A decisive push past $40 could come from a further breakout in gold prices, renewed weakness in the U.S. dollar, or signs of deeper supply tightness – especially if physical premiums start to rise again in key Asian markets."
Platinum fell 1.4% to $1,421.79 and palladium was up 0.2% at $1,277.26.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
5 minutes ago
- Reuters
Japan's Ishiba signals talks with Trump for early cut to US auto tariff
TOKYO, Aug 4 (Reuters) - Japanese Prime Minister Shigeru Ishiba said on Monday he will not hesitate to hold talks with President Donald Trump to ensure an agreed cut to U.S. automobile tariffs is implemented soon. In a parliament session on Monday, Ishiba drew criticism from some opposition lawmakers for not having signed an official document with the U.S. in clinching a trade deal last month. "Creating a document could have delayed the timing of tariff cuts. That was our biggest fear," Ishiba said, defending Japan's decision to agree on a deal without creating an official document with the U.S. "He is not a typical counterpart and could overturn rules," Ishiba said on Trump's negotiating style. Ishiba said he had "absolutely no hesitation" to hold talks with Trump to have Washington execute the tariff cut soon, though he declined to comment on when such talks could take place. "Both countries will begin executing what was agreed upon, which is harder than agreeing on a deal," Ishiba said, signaling his intention to stay on as premier to see through the process. Ishiba is under pressure from within his ruling Liberal Democratic Party to step down as prime minister to take responsibility for the party's huge defeat in last month's upper-house election. Japan's trade deal struck with Trump last month lowers U.S. tariffs on imports of goods including automobiles, easing the pain for the export-reliant economy. But there is no clarity on when U.S. tariffs for automobiles and auto parts will be cut to 15% from the current 25%, clouding the outlook for Japan's fragile recovery. In the same parliament session, Japan's top trade negotiator, Ryosei Akazawa, said it was hard to say how soon the U.S. could actually implement automobile tariffs, though he added it took "more than a month" in the case of Britain.
Reuters
7 minutes ago
- Reuters
Bank of England faces inflation challenge as it prepares to cut rates
LONDON, Aug 4 (Reuters) - The Bank of England is widely expected to cut its key interest rate to 4% from 4.25% on Thursday and to lower it once more before the end of the year, despite consumer price inflation rising to close to double the central bank's 2% target in June. But policymakers are divided over how much underlying price pressures are easing, and on whether a slowing labour market and sputtering growth will make inflation undershoot its target in the medium term if rates are not cut further. The following graphics set out some of the issues policymakers are likely to discuss before Thursday's decision. British inflation surged more than in the euro zone or the United States after Russia's full-scale invasion of Ukraine in 2022, hitting a peak of 11.1%, partly due to Britain's heavy reliance on natural gas for heating and electricity. Inflation fell sharply in 2023 and bottomed out at 1.7% in September 2024. But since then it has picked up more than in the United States or euro zone and in May the BoE forecast it would not be back to target until early 2027. Inflation rose to 3.6% in June, its highest since January 2024, and some economists think it will soon hit 4%. By contrast, the European Central Bank expects euro zone inflation to hover just below 2%. Most BoE officials view surveys of businesses and households' expectations for future inflation as an important guide to future price rises and wage demands, and even of the central bank's credibility. These measures have climbed over the past year. The Citi/YouGov measure of long-term expectations is near its highest since late 2022 - when headline inflation was in double digits - while the BoE's own survey is at its highest since 2019. However, some officials place less weight on these surveys, viewing responses as a reaction to recent inflation rather than a prediction of future behaviour. While headline consumer inflation fell sharply in 2023 before beginning to rise again, two components often used as a gauge of longer-term domestic price pressures have not dropped as much. Both services price inflation - which is heavily affected by increased labour costs - and core CPI, which strips out volatile elements - have stayed higher than headline inflation. Separately, food and drink inflation - which has a big impact on public perceptions of inflation and is especially noticeable for poorer Britons - has begun to pick up rapidly. Annual private-sector regular wage growth of just under 5% has slowed from a peak of more than 8% two years ago. But it is still about 2 percentage points higher than before the COVID-19 pandemic and the roughly 3% level which most policymakers view as consistent with 2% inflation. Both the central bank itself and employers surveyed by the BoE expect pay growth to slow further towards 3% over the next 18 months, putting downward pressure on inflation. But the drop in wage growth over the past year has not been smooth and rising unemployment and fewer job vacancies are not a guarantee that wage growth will slow as fast as the BoE expects. Purchasing Managers' index data for July showed British businesses were raising prices at a "robust pace" according to S&P Global which collects the monthly data. While down from 2022, the survey still shows bigger price increases than before the pandemic. Over the past year, costs for both services businesses and manufacturers have risen sharply - which will put upward pressure on prices if these are passed on to consumers.
Reuters
7 minutes ago
- Reuters
Shares get a lift in Asia as lower US rates are baked in
SYDNEY, Aug 4 (Reuters) - Share markets found some much needed support in Asia on Monday as the heightened prospect of lower borrowing costs helped soothe concerns about the U.S. economy, though the long-term credibility of U.S. policy remained in doubt. A buy-the-dip mentality led to a bounce in Wall Street and European stock futures, and allowed the dollar to stabilise after Friday's U.S. payrolls-induced retreat. Treasuries ran into some profit-taking after their huge gains, but fund futures still imply an 85% chance the Federal Reserve will cut rates in September and ease by 100 basis points or more by this time next year. The prospect of a shift in rates was the only silver lining to a dire payrolls report in which downward revisions left the three-month average of jobs growth at 35,000 from 231,000 at the start of the year. "The report brings payroll growth closer in line with big data indicators of job gains and the broader growth dataset, both of which have slowed significantly in recent months," said analysts at Goldman Sachs. "Taken together, the economic data confirm our view that the U.S. economy is growing at a below-potential pace." Neither did the reaction of President Donald Trump instil confidence, as the firing of the head of Labor Statistics threatened the credibility of U.S. economic data. Likewise, news that Trump would get to fill a governorship position at the Federal Reserve early added to worries about the politicisation of interest rate policy. Analysts assume the appointee will be loyal to Trump alone, though the president did grudgingly concede that Fed Chair Jerome Powell would probably see out his term. "It opens the prospect of broader support on the Fed Board for lower rates sooner rather than later," said Ray Attrill, head of FX research at NAB. "Fed credibility, and the veracity of the statistics on which they base their policy decisions, are both now under the spotlight." Markets have essentially already eased for the Fed, with two-year Treasury yields down almost 25 basis points on Friday in the biggest one-day drop since August last year. The drop in global yields seemed to help equities, with S&P 500 futures and Nasdaq futures both bouncing 0.4%. EUROSTOXX 50 futures gained 0.6%, while FTSE futures rose 0.5% and DAX futures 0.4%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab firmed 0.7%, aided by a 1.1% rally in South Korean (.KS11), opens new tab stocks. Japan's Nikkei (.N22%), opens new tab fell 1.4%, in part weighed by Friday's rebound in the yen, while Chinese blue chips were flat. Wall Street has taken comfort in an upbeat results season. About two-thirds of S&P 500 companies have reported, and 63% have beaten forecasts. Earnings growth is estimated at 9.8%, up from 5.8% at the start of July. Companies reporting this week include Disney (DIS.N), opens new tab, McDonald's (MCD.N), opens new tab, Caterpillar (CAT.N), opens new tab and some of the large pharmaceutical groups. The dismal U.S. jobs data did put a dent in the dollar's crown of exceptionalism, snuffing out what had been a promising rally for the currency. The dollar was a shade firmer at 147.79 yen , having shed an eye-watering 2.3% on Friday, while the euro held at $1.1574 after bouncing 1.5% on Friday. The dollar index was pinned at 98.801 , having tumbled from last week's top of 100.250. Sterling was restrained at $1.3281 as markets are 87% priced for the Bank of England to cut rates by a quarter point at a meeting on Thursday. The BoE board is expected to remain split on easing, while markets still favour two further cuts by the middle of next year. In commodity markets, gold was little changed at $3,357 an ounce , having climbed more than 2% on Friday. Oil prices extended their latest slide as OPEC+ agreed to another large rise in output for September, which completely reverses last year's cuts of 2.2 million barrels per day. Brent futures dropped 0.2% to $69.52 a barrel, while U.S. crude futures fell 0.1% to $67.24 per barrel.
