Gold extends record run amid tariff mayhem ahead of deadline

Trump doubles down on tariffs

Hopes that this week’s reciprocal tariffs would not be as harsh as feared were dashed over the weekend after US President Trump doubled down on his pursuit of using import levies to ‘make America great again’. With just a couple of days to go until the White House outlines the details of the reciprocal tariffs – the broadest set of restrictions yet to be unveiled by the Trump administration – there is a growing sense of panic in the markets about the scale and implications of the April 2 announcement.

The renewed jitters about Trump’s trade policies come after the President made a series of comments in the past 48 hours about the upcoming tariffs. The Washington Post reported on Saturday that Trump is urging his advisors to be more aggressive on tariffs as pressure grows on the US to tone down the rhetoric. But his toughening stance was reinforced on Sunday when Trump told reporters that the reciprocal tariffs will target “all countries”, not just the top 15 countries that have the largest trade imbalance with the US.

Further underscoring the view that Trump won’t back down this time were his comments to NBC News on Saturday that he “couldn’t care less” about US car prices going up following the imposition of auto tariffs. Only on Friday, there was still some optimism about Trump showing leniency on tariffs when he signalled that he was open to making deals.

Powell and NFP eyed amid stagflation risks

For global markets, this is a major setback for risk sentiment as there’s little in the way of any form of support right now, as central banks have their hands tied amid persisting inflation, so the scope for rate cuts is rather limited. The problem for investors is that even if Trump were to soften his stance again in the coming days or trade deals are struck whereby steep tariff increases can be avoided, there is a real risk of stagflation for the US economy.

The Fed’s closely watched inflation gauge – the core PCE price index – rose by a stronger-than-expected 2.8% y/y in February, while personal consumption bounced back less robustly than anticipated. The acceleration in the month-on-month increase in core PCE must be a significant concern for the Fed as it juggles to keep economic momentum going in the face of sticky inflation.

This puts the focus firmly on Friday when not only the latest nonfarm payrolls are due, but Chair Powell will be speaking as well.

Equities take a tumble

The elevated uncertainty as investors try to keep up with Trump’s almost daily policy shifts and adjust their earnings outlook accordingly is taking its toll on Wall Street. The near two-week rebound that didn’t even manage to get to the half-way point of the February-March selloff came to an abrupt end last week.

The slide extended on Friday, with the S&P 500 losing 2.0% and the Nasdaq 100 closing 2.6% lower. Equities globally are in the red today as investors become increasingly worried about a worldwide recession.

Government bond yields are declining and rate-cut expectations for the Fed and other major central banks are being ratcheted up, but these are of little comfort to stocks against a recessionary or stagflationary backdrop.

Yen shines, aussie slips ahead of RBA

The Japanese yen is firmer across the board today, benefiting from its safe-haven attributes, as the US dollar comes under pressure from Trump’s unwavering obsession with tariffs.

The Australian dollar is one of the few major currencies that’s down sharply against the greenback today. A slight improvement in Chinese PMIs in March is unable to provide much of a lift as investors expect the Reserve Bank of Australia to cut rates more aggressively if China falls foul of Trump’s tariffs. The RBA meets early on Tuesday and could sound more dovish as it holds rates unchanged.

There’s no stopping gold

Another safe haven that’s thriving in these uncertain times is gold. The precious metal is on another bull run, soaring to new record highs for the third straight session. It hit a new peak of $3,128/oz earlier today and is showing no sign of losing steam.

Further supporting gold are the signs that any ceasefire agreement between Ukraine and Russia is a long way off. Trump is reportedly not happy with Russia’s President Putin dragging his feet over a deal, while his suggestion that “there are methods” for seeking a third term as US president is also causing some angst.