Evening Track : Gold Gains on Tariff Uncertainty, Copper Surges on Exemption Hopes by Kotak Securities Ltd
Comex Gold futures are positive today as it trade above $3,025/oz, fueled by escalating trade uncertainties and geopolitical tensions. Trump's tariff pronouncements, including potential levies on automobiles and Venezuelan oil, heightened market anxiety. Gold's safe-haven appeal strengthened, contributing to its 15% year-todate rally, following a robust 2024. The upcoming U.S. PCE data is crucial for gauging Fed policy, with potential rate cuts bolstering gold's attractiveness. Additionally, talks in Saudi Arabia involving Ukrainian and U.S. delegations, following Russia-U.S. discussions, introduce further geopolitical variables. Gold's performance remains tied to trade dynamics, inflation signals, and evolving geopolitical landscapes, reflecting its role as a hedge against global uncertainties.
WTI crude oil prices are elevated, trading above $69.50 per barrel, driven by geopolitical tensions. President Trump's threat of a 25% tariff on Venezuelan crude oil purchases introduces significant supply disruption risks. Venezuela's 875,000 barrels per day output, primarily heavy, sour crude, is crucial for diesel and fuel oil production, impacting refiners in key markets like China, India, Spain, and the US. This potential tariff, coupled with existing US trade policies, is contributing to heightened market volatility, evidenced by a 10% drop in benchmark oil futures since January. The imposition of tariffs on Venezuelan oil would further exacerbate supply concerns, potentially leading to price increases, and will continue to inject volatility into the oil market.
LME base metals are showing a mixed trend, with copper extending its gains amid optimism that US tariffs will be more targeted than feared. Copper is up 1% at $9956/tonne for a second session, driven by anticipated tariff exemptions and robust industrial demand from electrification and AI. The Comex-LME price differential hit a record $1,400/tonne, boosting US imports. China's Yangshan premium indicates strengthening demand. However, US trade policy uncertainty, with impending automobile tariffs and potential exemptions, adds volatility. Zinc also rose on news of smelter disruptions in China's Hunan province due to water contamination. Both metals are reflecting a mix of bullish demand signals and geopolitical trade uncertainties.
European natural gas prices experienced a downward trend as the market closely observes outcomes from US-Russian talks in Saudi Arabia, centered on Black Sea navigation. This potential for easing geopolitical tensions has introduced some bearish pressure, fueled by speculation of possible Russian gas flow resumption. However, underlying supply concerns persist. European inventories are below seasonal averages, and the cessation of Russian pipeline flows via Ukraine has tightened the market. Furthermore, current seasonal pricing suggests a potential lag in storage injections during the summer, exacerbating supply vulnerabilities. The market is thus balancing short-term geopolitical hopes against long-term supply anxieties.
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