- Trump asked the US’s trading partners to come up with good offers for negotiations.
- Gold has gained 28% this year, mostly due to the uncertainty caused by Trump’s tariffs.
- US job openings increased more than expected.
Gold fluctuated on Wednesday amid uncertainty about developments on trade talks between the US and its trading partners. At the same time, there was caution as market participants awaited the pivotal US nonfarm payrolls report.
Trump asked the US’s trading partners to come up with good offers for negotiations by Wednesday. Since April, market participants have been watching developments in trade negotiations. The trade deals with the UK and China eased trade tensions and weighed on gold prices. However, since then, progress has been slow. At the same time, the 90 days are slowly coming to an end. Therefore, there is pressure to get more deals.
Meanwhile, trade tensions continue to simmer after Trump accused China of violating a part of the deal to cut tariffs. At the same time, the US president doubled tariffs on steel and aluminium imports on Wednesday. The move could trigger responses from some of its major trading partners that could spark another trade war. Such an outcome would favor gold, which climbs when there is uncertainty.
So far, gold has gained 28% this year, mostly due to the uncertainty caused by Trump’s tariffs. The trade war with China dimmed the outlook for the global economy. At the same time, higher tariffs increased the likelihood of a US recession. Gold’s rally slowed when the US started signing trade deals and lowering tariffs.
Market participants have also been closely watching US economic data for clues on the state of the economy. Data on Monday revealed that business activity in the manufacturing sector contracted further, increasing pressure on the Fed to lower borrowing costs.
US job vacancies (Source: US Bureau of Labor Statistics)
However, data on Tuesday revealed that job openings increased more than expected. Vacancies came in at 7.39 million compared to the forecast of 7.11 million. The report shows solid demand for labor. As a result, the dollar strengthened while gold fell.
However, traders are more focused on the upcoming nonfarm payrolls report. Forecasts show that the US economy added 132,000 new jobs in May. This would be a drop from the previous reading of 177,000. Meanwhile, the unemployment rate might hold at 4.2%. An upbeat report will ease Fed rate cut bets and weigh on gold. On the other hand, a downbeat report would favor gold by increasing Fed rate cut expectations.
