Market Recap
On Monday, gold soared over $30 as safe-haven demand surged following Trump’s confirmation that 25% tariffs on Mexico and Canada will take effect on March 4. A weaker dollar also supported the rally, with gold closing at $2,893.67/oz. Meanwhile, oil prices tumbled nearly 2% after OPEC+ unexpectedly announced plans to restore output from April, following pressure from Trump.
Gold Overview
- Gold prices surged over $30, supported by safe-haven demand and a weaker dollar, after Trump confirmed that 25% tariffs on Mexico and Canada would take effect on March 4.
- At the close, spot gold rose 1.24% to $2,893.67/oz.
Key Market Drivers:
- Tariff Uncertainty: Trump’s announcement that 25% tariffs on Mexico and Canada will begin Tuesday, with additional reciprocal tariffs set for April 2, fueled market anxiety, boosting gold.
- Weaker U.S. Economic Data:
- February U.S. Manufacturing PMI fell to 50.3, signaling stagnation.
- Input costs hit a two-year high, raising stagflation fears.
- Atlanta Fed GDPNow Model predicts Q1 GDP contraction of -2.8%, worsening from -1.5% previously.
- Dollar Weakness:
- The U.S. dollar index fell nearly 1% to 106.55, bolstering gold’s appeal.
- Bullish Gold Forecast:
- RJO Futures strategist Daniel Pavilonis expects gold to break $3,000, citing potential central bank purchases in response to tariffs.
Gold – Technical Outlook
Gold initially dipped below $2,860 but rebounded sharply, reclaiming the $2,890 level by the close.
- Key Resistance: $2,905-$2,910
- Key Support: $2,878-$2,873
Oil Overview
- WTI crude tumbled nearly 2%, closing at $68.37/bbl, after OPEC+ unexpectedly confirmed an April production increase.
- Brent crude fell 1.63% to $71.62/bbl.
Key Market Drivers: - OPEC+ Supply Decision:
- Following pressure from Trump, OPEC+ surprised markets by confirming April supply hikes, marking the first production increase since 2022.
- The group will gradually lift its 2.2 million bpd supply cuts, adding 138,000 bpd per month.
- However, OPEC+ stressed that adjustments would be made if market conditions deteriorate.
- Market Shock:
- Oil traders had widely expected OPEC+ to delay supply hikes due to concerns over Saudi Arabia’s budget shortfalls and a potential supply glut later in 2024.
- Trump’s Tariff Pressure:
- Trump’s repeated demands for lower oil prices and criticism of OPEC+ pricing policies played a role in the decision.
Oil – Technical Outlook
Oil fell sharply from the $70.6 resistance level, resuming its downtrend after a brief two-day rebound.
- Key Resistance: $69.5-$70.0
- Key Support: $67.3-$66.8
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