Gold gains amid renewed US-China tariff tensions

Today’s headlines

What’s happening: Gold prices rose on Friday following renewed tensions between the US and China.

What happened: Investors moved to safe-haven assets after the US warned of imposing new tariffs after China tightened its export controls.

Weakness in the US dollar also lent support to the yellow metal.

Why it matters: On Friday, Trump said he sees no reason to meet with China’s President Xi Jinping in South Korea as scheduled. He also warned of a massive rise in tariffs on imports from China after Beijing announced plans to tighten export controls on rare earths.

Weakness in the US dollar provided a further boost to gold prices, as a softer greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.7% on Friday.

Investors are also carefully assessing risks related to collapse of the government in France and the extended government shutdown in the US.

The US Federal Reserve is also expected to lower interest rates by 25 basis points each during the upcoming two policy meetings this year. The demand for the non-yielding bullion generally rises in a low-rate environment.

Several factors, including geopolitical risks, buying by central banks, rate cut expectations by the Fed and rising trade tensions due to Trump’s tariff policies, have provided support to gold prices for several weeks.

Gold for December delivery gained 0.7% to close at $4,000.40 an ounce on Friday. The yellow metal surged around 3% last week and recorded its eighth consecutive week of gains. Gold prices extended gains this morning, climbing around 1.7%.

Silver prices also benefited from the same factors that drove the rally in gold. Silver settled higher at $47.247 an ounce on Friday.

Palladium gained 13% last week and closed Friday’s trading at $1,470.60, while platinum settled at $1,623.0, recording a weekly loss.

What to watch: Investors will continue monitoring talks between the US and China related to fresh tariffs. Markets will also watch Trump’s social media posts, with the President commenting “The U.S.A. wants to help China, not hurt it!!!” over the weekend, sparking hopes of a resolution to the trade war.

The ongoing US government shutdown, comments from Fed members and the political situation in France will also remain in focus.

The markets today

The Canadian dollar in focus today ahead of building permits data

Context: The CAD/USD forex pair rose this morning as investors digested the latest jobs data for signals on the Bank of Canada’s upcoming monetary policy.

Details: Data released on Friday showed Canada’s employment surged by 60,400 in September, following a 65,500 decline in the previous month. The figure also came sharply above market expectations of a 5,000 gain.

Canada’s unemployment rate came in steady at 7.1% in September, remaining at its highest level since August 2021. However, the figure was better than market estimates of 7.2%. The number of unemployed people climbed by 11,900 to 1.61 million last month.

The Bank of Canada’s policymakers slashed the policy rate to 2.5% for the first time since March at the meeting in September to lend support to the economy. Speculation of an interest rate cut this month came down significantly after the release of unemployment data and triggered gains in the Canadian dollar.

Weakness in the US dollar lent further support to the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 98.89 this morning.

Higher prices of crude oil, one of Canada’s major exports, further boosted the loonie. WTI crude oil prices surged 1.8% to trade at $59.93 per barrel this morning.

The CAD/USD pair gained around 0.1% to 1.3988. The S&P/TSX Composite Index had declined by 1.38% to close at 29,850.89 on Friday.

What to watch: Investors await the release of economic data on building permits (1630 UAE Time) from Canada on Tuesday. The total value of building permits in Canada, which fell by 0.1% to $11.9 billion in July following a 9% plunge in June, is expected to rise by 0.2% in August.

Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.90%, 2.71% and 3.49%, respectively.

The news shaping the markets

US President Donald Trump said he may approve long-range Tomahawk missiles for Ukraine if Russia’s President Vladimir Putin continues the war. The news sent the RUB/USD pair lower in forex trading this morning.

Egypt’s rating was upgraded by S&P Global to ‘B’, which lent support to the EGP/USD forex pair.

New Zealand’s visitor arrivals jumped 7.5% year-over-year to 230,300 in August. The surge in Australian visitors sent the NZD/USD pair higher in forex trading this morning.

Spain’s consumer confidence indicator declined to 81.5 in September, from 82.9 in the previous month and compared to 84.8 in the year-ago period, exerting pressure on the EUR/USD forex pair.

Brazil’s producer prices declined by 0.2% in August. This coming after a 0.31% easing in July sent the BRL/USD pair higher in forex trading this morning.

What else to watch today

Germany’s 12 month Bubill auction (1330 UAE Time) and current account (1600 UAE Time), India’s inflation rate (1430 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), Russia’s balance of trade (1700 UAE Time) and current account (1700 UAE Time), as well as Brazil’s business confidence (1800 UAE Time).