Evening Track : Crude oil extends losses amid tariffs & output fears, Gold retreats as trade war uncertainty - Kotak Securities Ltd
Comex Gold futures experienced a slight retreat, hovering below $2,930 per ounce, after a robust two-session rally fueled by Trump's escalated tariffs. The nearrecord high, just shy of last week's peak, reflects heightened safe-haven demand amidst trade uncertainties. Trump's doubled tariffs on China and levies against Canada and Mexico have sparked inflation and global growth slowdown concerns, bolstering gold's appeal. While Commerce Secretary Lutnick hinted at potential tariff relief for US neighbors, market anxieties persist. A JPMorgan Treasury client survey reveals record bullish bond positions, indicating growing fears of US economic disruption from the trade disputes. Gold, up over 40% since late 2023, remains a key asset in this climate of uncertainty.
WTI crude oil remained under pressure to trade below $67.50/barrel, following Commerce Secretary Lutnick's comments regarding potential, though limited, tariff adjustments on Mexico and Canada. This injected fresh market uncertainty, exacerbating existing concerns over potential trade wars. Crude has declined since midJanuary, driven by fears that escalating trade tensions, particularly U.S. tariffs, will dampen global energy demand. Oil options traders reflect heightened bearish sentiment, reaching a five-month peak, due to tariff-related anxieties and OPEC+'s planned production increases. The market remains sensitive to geopolitical developments, with ongoing trade disputes posing a significant downside risk to oil prices.
LME base metals surged, with copper and zinc leading gains, rebounding from earlier week losses due to persistent anxieties regarding potential US tariffs on copper imports, initiated by President Trump to bolster domestic production. The proposed tariffs threaten to strain US supply, given its reliance on imports and limited smelting capacity. Concurrently, imminent US aluminum and steel tariffs further exacerbate global metal market pressures. Market sentiment was also buoyed by China's confirmation of its 2025 GDP growth target at "around 5%," a key indicator for copper demand, as China remains the largest consumer. This combined effect of potential supply constraints and sustained Chinese demand drove the LME metal price rally.
European natural gas trading around €44/MWh, following a three-week decline exceeding 20% due to heightened geopolitical uncertainty, notably escalating USUkraine tensions and evolving US trade policies. Market participants are reducing exposure, evidenced by a 10-month low in aggregate open interest, signaling position closures reflects unease regarding potential impacts on European gas supplies. The region faces the critical task of replenishing storage reserves amidst this uncertainty, contributing to increased market volatility. The confluence of geopolitical factors and storage pressures is driving the current market dynamics.
Source: Trading View
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