Background on Key Figures and Context
Donald Trump, the President of the United States, has recently threatened to impose a 30% tariff on most imports from the European Union (EU) and Mexico, effective August 1st. This move adds to his previous warnings against other countries, causing market volatility.
Investors are now looking forward to the upcoming U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data to gauge the Federal Reserve’s interest rate path. Market expectations are for a 50 basis points reduction by year-end, starting from October.
Historically, gold tends to thrive in low-interest-rate environments. Meanwhile, Indian investors, known for their affinity towards gold accumulation, are increasingly opting for silver due to its superior returns this year compared to gold.
Gold’s Rally
At 3:57 a.m. CDMX time, spot gold was up by 0.4% at $1,367.51 per ounce, reaching its highest level since June 23rd. Meanwhile, U.S. gold futures gained 0.5% to $1,373.00 per ounce.
Giovanni Staunovo, an analyst at UBS, stated, “Trump’s tariff threats are bolstering demand for safe-haven assets, and gold is one of the primary beneficiaries.”
Silver’s Surge
Spot silver was up by 1.7% at $19.02 per ounce, its highest level since September 2011 following the trading week. Staunovo explained, “Silver’s rise is driven by speculative flows, with the metal moving above technical resistance levels.”
Other Precious Metals Performance
- Platinum: Down by 1.2% at $1,382.72 per ounce.
- Palladium: Up by 1.3% at $1,230.87 per ounce, its highest level since late October 2014.
Key Questions and Answers
- What caused the recent surge in gold and silver prices? The primary driver is President Trump’s threats of tariffs on EU and Mexican imports, which has increased demand for safe-haven assets like gold and silver.
- Why are Indian investors shifting towards silver? Silver’s returns have outperformed gold this year, making it a more attractive investment option for Indian investors traditionally focused on gold accumulation.
- What are market expectations for the Federal Reserve’s interest rates? Investors anticipate a 50 basis points reduction in interest rates by year-end, with adjustments starting from October.
- How do low-interest rates affect gold prices? Historically, gold tends to prosper in low-interest-rate environments.
