US President Donald Trump has announced a decisive move to impose a 25% import tax on all steel and aluminium entering the United States. This bold decision has heightened concerns of a looming global trade war, with potential repercussions for international economic stability. As the world watches closely, the European Union (EU) has expressed a preference for negotiations over retaliatory measures, aiming to prevent an economic conflict that could be damaging for all parties involved.
The announcement comes on the heels of the US Consumer Price Index (CPI) data release for January, which revealed an unexpectedly high inflation rate. Core inflation rose to 3.3% year-on-year, surpassing market expectations. This data prompted a hawkish response from the Federal Reserve, leading to a sharp rise in US Treasury bond yields on Wednesday. Despite the hot CPI figures and hawkish remarks from Fed Chair Jerome Powell, the US Dollar remains subdued, adding another layer of complexity to the economic landscape.
In the commodities market, gold prices have seen renewed interest, climbing back to $2,900. The metal, often viewed as a hedge against inflation, benefits from the uncertainty surrounding Trump's tariffs and the risk of a trade war. Investors have engaged in dip-buying as technical indicators suggest further upside potential. The Relative Strength Index (RSI) holds comfortably above the midline at approximately 63.50, supporting this bullish outlook.
Traders are eyeing upcoming US Producer Price Index (PPI) data, due later in Thursday's American session, as it could significantly influence gold prices. A four-hourly candlestick closing above the critical $2,910 level is required for further recovery. Should this occur, the next resistance point lies at the record high of $2,943.
In other currency markets, the Australian Dollar remains defensive below the 0.6300 mark during Thursday's Asian trading session. The ongoing developments in US trade policy and inflation data continue to cast a shadow over currency values globally.
The EU, meanwhile, is focusing on diplomatic efforts to avert a trade war. Officials emphasize dialogue and negotiation as preferred means to resolve disputes with the US. By avoiding retaliatory countermeasures, the EU aims to maintain stability in international trade relations and protect its economic interests.
As markets absorb these developments, analysts note that gold's status as a safe haven asset is reinforced by current inflationary pressures. Investors are increasingly turning to gold amidst fears of escalating trade tensions and their potential impact on global economic growth.