Tariff tensions have been on the rise again this week, with Trump making pointed remarks about Canada and Japan. After briefly taking a backseat to events in the Middle East (i.e. Israel-Iran conflict), Trump’s comments about ending trade talks with Canada and his frustration about Japan not importing US rice suggest that the US President’s ire is on the rise ahead of the key July 9th tariff deadline, which could be a warning bell for risk assets.
If the tariff pause is not extended (Trump has indicated he will not extend the pause), we could see a return to ‘Liberation Day’(i.e. April 2nd) tariff levels, and we all know what happened then as market chaos ensued. Right now, the market is waiting to see what happens next - perhaps 'Liberation Day Mark 2', another tariff pause, or a bunch of trade deals getting inked. As such, it’s still up in the air as to which way market sentiment will swing in the coming weeks.
Following a brief dip below the $3300 level earlier in the week, gold has made its way back to $3340. Ongoing USD weakness and some investor nerves about what may happen when the July 9th tariff pause deadline arrives has served to keep gold in the frame despite lower geopolitical risks. For gold, key support remains at $3250 and this needs to hold to prevent any larger price slides than what we have seen lately.
Near term resistance sits at $3355 and $3375 which if overcome would open up a potential run back towards $3400. Whether gold’s next move is in the direction of $3400 or back below $3300 may depend on whether the USD continues to head south or if it stages a rebound. What the US does concerning the looming July 9th tariff deadline could also be pivotal for gold. If the Trump administration starts to play hardball again with tariffs this would likely suit gold. However, any tariff pause extension could undermine the precious metal.
With much of the risk premium remaining removed from energy prices while the Israel-Iran ceasefire continues to hold, the focus has shifted back to OPEC+ and their possible plans of increasing production yet again. The cartel may soon decide that August will be time to add further supply to the market, much like they did in May, June and July. If OPEC+ does indeed add additional supply to the crude market, this could any attempts to get back to the $70 level by crude a difficult one in the absence of renewed geopolitical risks.
It’s a holiday-shortened trading week in the US, which means that the all-important Non-Farm Payrolls (NFP) will be released on Thursday rather than their usual Friday time-slot. We expect to see the NFP release come out at around the 120k level, which would be down from the 139k jobs created in the prior month, but still above what could be considered to be the ‘neutral’ job creation level.
The private ADP jobs figures will give us a preview when they get released on Wednesday, however the historical correlation between the ADP and NFP figures is not particularly strong. Aside from this, traders will be watching for clues from the White House about whether tariff levels are headed north again once the July 9th deadline arrives. Any moves by the Trump administration to up the ante with respect to tariffs could again see risk appetite levels start to waiver.
