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What’s happening: Gold prices rose sharply on Tuesday amid further weakness in the US dollar.
What happened: The greenback remained weak on Tuesday after Moody’s slashed the US sovereign rating, providing a boost to gold.
Uncertainty over the US tariff policy and ceasefire between Russia and Ukraine lent support to the safe-haven metal.
Why it matters: A leading rating agency Moody’s downgraded the US federal government’s sovereign credit rating from “Aaa” to “Aa1” on Friday, due to the government’s outstanding debt and interest worth $36 trillion.
Federal Reserve members also expressed heightened concerns over the impact of the Trump administration’s policies on economic growth. St. Louis Federal Reserve Bank President Alberto Musalem said tariffs are expected to weaken the labour market and the economy, despite the recent easing of trade tensions between the US and China.
The US dollar started the week subdued and remained under pressure on Tuesday, which lent support to gold prices, as a lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, has dipped around 10.6% from its January highs.
The uncertainty around a ceasefire between Russia and Ukraine has impacted metal prices, especially platinum and palladium. Russia is the biggest producer of palladium and the second largest producer of platinum in the world.
US President Donald Trump held talks with Russian President Vladimir Putin but failed to secure a ceasefire commitment. The European Union and UK imposed fresh sanctions against Russia amid the talks.
US gold futures jumped 1.6% to close at $3,284.6 an ounce on Tuesday.
In other metals trading, silver settled higher at $33.174 an ounce, platinum surged to its strongest level since October 2024, while palladium jumped to its highest mark since February 4.
What to watch: Investors will continue assessing talks between Russia and Ukraine as well as any tariff related announcements from the Trump administration.
Context: Japan’s Nikkei 225 fell slightly this morning as investors digested the latest trade data.
Details: The Nikkei 225 index edged lower this morning, after recording a modest gain in the previous session.
Data released on Wednesday showed exports grew by 2.0% year-over-year in April, the slowest in seven months due to higher tariffs imposed by the US. Meanwhile, imports declined less than expected, signalling Tokyo’s measures to support domestic demand following increased trade uncertainty. Japan’s imports dipped 2.2% year-over-year in April, compared to 1.8% in the previous month.
Japan’s trade deficit shrank to ¥115.85 billion in April, from ¥504.69 billion in the year-ago period. However, the figure was worse than to market estimates of a ¥227.1 billion surplus.
The Reuters Tankan index for Japanese manufacturers also fell to a reading of 8 in May, compared to an eight-month high of 9 in the previous month, signalling a slight decline in business confidence.
Meanwhile, Japan’s chief tariff negotiator, Ryosei Akazawa, is set to leave for the US on Friday for a third round of talks, also reaffirming the demand to remove US tariffs.
The Nikkei 225 shed 0.1% to reach 37,491.80 this morning.
Meanwhile, the USD/JPY forex pair fell 0.4% to trade at 143.92 this morning, with the Japanese yen recording gains for the seventh consecutive session.
What to watch: Investors await the release of economic data on Japan’s machinery orders (0350 UAE Time), Jibun Bank manufacturing PMI (0430 UAE Time) and Jibun Bank services PMI (0430 UAE Time) on Thursday. Japan’s core machinery orders, which surged 4.3% to ¥894.7 billion in February, are expected to decline by 1.6% in March.
Analysts expect the au Jibun Bank Japan manufacturing PMI to decline slightly to 48.5 in May, from 48.7 in April, while the services PMI is projected to fall to 51.2 in May, from 52.4 in the previous month.
Other Markets: European indices closed higher on Tuesday, with FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.94%, 0.42%, 0.75% and 0.73%, respectively.
US Secretary of State Marco Rubio reportedly announced imposing fresh sanctions on Russia if the peace talks stall in its war with Ukraine. The news sent the RUB/USD pair lower in forex trading this morning.
China’s fiscal revenue declined 0.4% year-over-year during the first four months of the year to ¥8.06 trillion. This marked an easing from the 1.1% decline recorded in the January to March period, lending support to the CNY/USD forex pair.
New Zealand reported a trade surplus of $1.43 billion in April, compared to a $3 million deficit in the year-ago period. Exports jumped 25% year-over-year to $7.8 billion, sending the NZD/USD pair higher in forex trading this morning.
Australia’s Westpac-Melbourne Institute Leading Economic Index came in unchanged for April, compared to a 0.2% decline in March, which lent support to the AUD/USD forex pair.
The American Petroleum Institute reported that US crude oil inventories rose by 2.499 million barrels in the week ending May 16, compared to a gain of 4.29 million barrels in the previous week. The latest reading coming in higher than market expectations of a decline of 1.85 million barrels sent WTI crude oil prices lower this morning.
South Africa’s inflation rate (1200 UAE Time) and retail sales (1500 UAE Time), UK’s 6-year Treasury Gilt auction (1300 UAE Time), Germany’s 10-year Bund auction (1330 UAE Time), US MBA mortgage applications (1500 UAE Time), EIA crude oil stocks change (1830 UAE Time), EIA gasoline stocks change (1830 UAE Time), EIA Cushing crude oil stocks change (1830 UAE Time), EIA distillate stocks change (1830 UAE Time), EIA heating oil stocks change (1830 UAE Time), 17-week bill auction (1930 UAE Time) and 20-year bond auction (2100 UAE Time), Eurozone’s 3-month bill auction (1510 UAE Time) and 6-month bill auction (1510 UAE Time), Mexico’s retail sales (1600 UAE Time), Canada’s new housing price index (1630 UAE Time) and 30-year bond auction (2000 UAE Time), as well as Argentina’s economic activity (2100 UAE Time).
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