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Gold falls as Iran threatens to support the dollar, keeping inflation fears in mind
Prices of gold fell on Monday, after the?Iran claimed it had hit a 'U.S. Gold?prices fell on Monday after?Iran said it had struck a u.s. By 8:51 am, spot gold had fallen 0.9% to $4,572.40 an ounce. ET (1251 GMT). U.S. Gold futures dropped 1.3% to $4.583.70. Gold prices are down again, due to the Strait of Hormuz issues. "The latest 'news' clearly did not give the market confidence in the future and raised the specter inflation issues along with fairly hawkish interest rate signals," said TD Securities global head of commodity strategies Bart Melek. According to Axios, Iran claimed that it forced a U.S. ship to turn around?from entering Strait of Hormuz. However, a U.S. official has denied the report. After the news, both the U.S. Dollar and oil prices rose. The dollar price of metals increases when the U.S. dollar strengthens. The soaring prices of energy have heightened inflation fears and boosted bets on central banks keeping interest rates high for longer. Barclays has joined the growing list of 'brokerages who bet against any policy easing by the U.S. Federal Reserve in this year. The Fed's most divided decision since 1992, which was made last week, left rates unchanged. This was due to the growing concern about the rising energy prices that are affecting the economy. This week, key data includes the ADP Employment Report and the April Payrolls report. Gold is a hedge against inflation, geopolitical unrest and other risks. However, it loses its appeal when rates are high because the metal offers no return. "I see strong levels of support around $4,200 gold. I think that there will be broader issues in the future which could support gold prices. Melek stated that traders could be pushed to sell positions due to uncertainty and possible rate increases. Silver fell by 1.9% at $73.94, while platinum dropped 0.9% to $1971.05 and palladium lost 2.4% to $1488.28. (Reporting and editing by Shilpa Majumdar in Bengaluru, Ashitha Shivaprasad from Bengaluru)
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German automakers caught in the crosshairs of Trump's latest tariff salvo
The shares of German automakers fell on Monday after President Donald Trump decided to increase U.S. tariffs on imported European vehicles to a 25% levy from the previously agreed 15% levy, dealing 'a 'fresh blow to an already battered industry. As of 1046 GMT the pan-European auto and parts index had fallen 2.3%, while shares for Porsche, BMW Mercedes-Benz, and Volkswagen all fell between 2% and 3%. Trump claimed on Friday that Brussels had failed to comply with an agreement reached between Washington DC and Brussels in 2017 that reduced U.S. tariffs on automobile imports by 15%. The implementation by the EU has been slow, and it is not expected to be complete before June. Trump's tariff announcement that he said would force European firms to move production more quickly to the U.S. has now upset this deal, and drawn harsh criticism from European politicians. GERMAN CARMAKERS: ANOTHER YEAR OF WARNINGS ABOUT PROFIT? After the first round of U.S. tariffs, the head of ANFIA –?the lobby for Italy's auto parts makers that largely supplies German carmakers – said that the industry is now better prepared to deal with higher duties. Roberto Vavassori stated, "It's another slap on the face after we have already suffered a barrage" He said that the Trump administration may have felt the need to increase the tariffs due to the influx of refund requests it has received since the U.S. Supreme Court ruled against some of President Trump's tariffs back in February. "That is the only rationale that I can think of." Vavassori stated that the administration's main goal is to keep you on your feet. Matthias Schmidt, European Autos Market Analyst at Schmidt Automotive, says that additional duties will further weaken Germany's premium auto manufacturers. He stated that he expected "2026 will be another year of warnings" and noted that Audi, Porsche and other companies are most vulnerable due to the lack of U.S. manufacturing facilities. Bernstein Research estimates the additional 10 percent in tariffs will cost Germany's automakers around 2.6 billion euro ($3.05 billion). It added that manufacturers would likely "attempt" to offset some of the burden by raising prices. Germany's export dependent automotive sector is already under pressure from a softening of demand in China and a slowing of global growth, as well as increased input costs. Volkswagen Group, which includes Audi and Porsche, will suffer a 4 billion euro hit in 2025 due to U.S. Tariffs. Volvo Cars in Sweden, whose shares fell by 0.2%, stated that it was still too early to make any comments on the potential implications of the new tariffs. Rico Luman, a senior economist at ING Research noted that Trump 'has used tariff threats regularly as a negotiating tool, but he has not always followed them through and implemented them. The EU legislative and adoption process can be lengthy. The threatened tariff could encourage the EU Parliament and Council, however, to accelerate formal adoption.
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Dollar firms as gold falls amid Middle East inflation fears
Gold prices dropped?more that 1% on?Monday in thin trading, pressured by the rising tensions between Iran and the U.S., which increased inflation fears and decreased expectations of rate cuts. A firmer U.S. Dollar also weighed. As of 1140 GMT, spot gold fell 1.3% to $4,553.53 an ounce. U.S. Gold Futures for June Delivery fell 1.7% to $4,654.40. As markets in China and Japan are closed, volumes were low. After Iran's Fars reported that an American warship had been hit with missiles, it was forced to turn back from the Strait of Hormuz. U.S. Central Command, however, said that no U.S. Navy vessels had been hit. Han Tan, chief analyst at Bybit, said that "gold has been rocked by renewed concerns regarding the Middle East conflict. The U.S. Dollar again demonstrates its status as the preferred safe haven." Dollar-priced gold is now more expensive to other currency holders. Tan said that "gold is likely to be sensitive to an ever-changing geopolitical environment, which frames the global inflation forecast." OIL PRICES HAS ALMOST DOUBLED Brent has almost doubled its price since the beginning of the year. As manufacturers pass on costs to consumers, rising fuel prices can lead to inflation. Central banks are often forced to keep interest rates high to combat higher costs. Bullion does not bear interest, unlike Treasury yields. Due to this, gold has fallen by over 13% since World War I began due to the high?costs of holding it at a time of elevated interest rates. Last Wednesday, the Fed held interest rates at their current level. The oil price shock, according to some officials who disagreed with this policy statement, meant that the Fed could no longer be seen as favoring rate cuts and that a future rise in borrowing costs was possible. Silver spot fell by 3.1%, to $73.04 an ounce. Platinum dropped 2.5%, to $1.938.65. Palladium lost 3.5%, to $1.470.75. (Reporting and editing by Barbara Lewis, Bernadettebaum, and Anjana Anil from Bengaluru)
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China uses anti-sanctions laws to counter US blacklisting refiners
China has, for the very first time, invoked a law that targets?companies? that comply with foreign sanction it rejects. This is a response to the U.S. listing of oil refineries who bought Iranian crude. The Ministry of Commerce issued an order on Saturday to companies to not comply with U.S. Sanctions against five refiners including the recently designated Hengli Petrochemical. Beijing cited a law which allows it to retaliate if entities enforce sanctions that Beijing deems illegal. Washington and other Western governments have sanctioned several Chinese firms that trade Iranian or Russian crude oil. This has drawn?repeated critics from Beijing. Hengli Petrochemical denies that it has traded with Iran. Independent refiners are the main buyers of Iran’s oil exports. TRUMP TO VISIT BENJING This move comes less than two weeks before U.S. president Donald Trump visits Beijing. It shows China's willingness, despite the trade truce between Washington and Beijing, to use its economic tools to exert pressure. China's law, which was introduced in 2021, and last revised in April, allows it to impose countermeasures against companies and individuals. These include trade and investment restrictions, as well as entry and exit limitations. Legal analysts claim that the law puts counterparties of sanctioned companies in a difficult situation, as they may be subject to Chinese law violations if?they comply with sanctions from abroad, or other penalties if not. The Canadian 'Trade Commission Service' warned companies in China operating last August about the potential for them to be caught between U.S. and European Union?rules, as well as Chinese?rules. China's People's Daily, the official newspaper of China, said that the decision "uses the strength of the rule-of-law to counteract the U.S.'s long arm jurisdiction." According to the law,?companies can apply for exemptions. A trader from a Hengli counterparty who declined to be identified said that firms with significant overseas business should be able make their case to Chinese regulators for exemptions. Lewis Jackson reports from Beijing. Tony Munroe, Mark Potter and Tony Munroe edited the article.
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UAE announces it will discuss currency swap lines with US
On 'Monday, the United Arab Emirates announced that it is in talks with the United States about a currency exchange line. "We are having this discussion and conversation with many.?It's a part of an elite group with whom the U.S. has this swap policy. "They only have it with five countries," Thani al Zeyoudi told a conference in Abu Dhabi. "To be part of this group means that the transactions...?trade, investment between both nations reach an level where that exchange is highly necessary...?so (it) is an elite issue, it's not about bailing-out," he said at the "Make It In The Emirates" conference. Currency swap lines allow central banks to exchange currencies without having to use foreign exchange markets. This reduces transaction costs and exchange rate risk for international trade. The U.S. Federal Reserve maintains permanent central bank currency exchange lines with five major central banks: the Bank of Canada (Bank of Japan), the European Central Bank (ECB), the Bank of England, and the Swiss National Bank. U.S. Treasury secretary Scott?Bessent stated last month that allies from the Gulf region, Asia and Europe had requested currency exchange?lines to deal with the?impact of the Middle East conflict. The conflict, which began with U.S.-Israeli strikes on Iran?on February 28th, has shut down the Strait of Hormuz. This is a crucial chokepoint where about 20% of oil and LNG shipments travel, and this has pushed up oil prices. Al Zeyoudi?did not provide any further details about?the discussion, the size or the timeline for an agreement regarding the currency swap line? with the United States. Reporting by Federico Maccioni, Writing by Eman Aboushassira, Editing by Andrew Cawthorne & Alexander Smith
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Gold drops as the dollar rises, and Middle East unrest fuels inflation fears
The gold price fell in a thinly traded session on Monday due to the rising tensions with?the United States. The tensions between the U.S. and Iran have increased inflation fears and reduced expectations for interest rate reductions. As of 1020 GMT, spot gold was down 1.6% to $4,538.19 an ounce. U.S. Gold Futures for June Delivery fell 2.1% to $4,48.30. The volume was low due to the fact that markets in China and Japan were closed for holidays. After Fars reported that an?U.S. After ignoring Iran’s warnings, a warship that was going to cross the Strait of Hormuz had its plans redirected. The price of gold is likely to be affected by a slightly stronger dollar and modestly increased interest rates, which are likely influenced by the rise in oil prices. This was the opinion of UBS analyst Giovanni Staunovo. Dollar-priced gold is now more expensive to other currency holders. OIL PRICES HAS ALMOST DOUBLED Brent has almost doubled its price at the beginning of the year. As manufacturers pass costs on to consumers, rising fuel prices can lead to inflation. Central banks are often forced to raise interest rates to combat higher costs. Bullion, unlike Treasury yields does not bear interest. Gold has fallen by over 13% in value since the beginning of the 'war, because of the high cost of holding gold at a time of elevated interest rates. Han Tan, Bybit's chief market analyst, said that spot?gold will likely oscillate in the $4k range, and its upside is limited as long as inflation worries continue to weigh on the collective mind of the?market. Last Wednesday, the Fed held interest rates at their current level. The policy statement was criticized by several officials. They said that the oil price shock made it clear the U.S. Fed could no longer be leaning towards interest rate cuts, and that an increase in borrowing costs in the future is possible. Silver spot fell by 3.5%, to $72.74 an ounce. Platinum lost 2.9%, to $1,931.92, while palladium dropped 4.1%, to $1,462.00. (Reporting by Anjana Anil in Bengaluru; editing by Barbara Lewis)
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Ambuja Cements' profit nearly triples on record tax gains and volume
Ambuja Cements, a cement manufacturer in India, reported on Monday a?threefold increase?in the fourth quarter profit. This was aided by?tax benefits and record sales of cement. Adani Group's cement maker reported a profit after tax of 16,44 billion rupees (173,06 million dollars) for the three months ended March 31. This is up from 5,55 billion rupees one year ago. The company recorded its highest quarterly volume ever, with a 10% increase in sales year-on-year, driven by demand for infrastructure. The company recorded a tax credit of approximately 14.6 billion rupees during the quarter ending March, which boosted its bottom line. Ambuja refunded excess tax provisions for earlier years after favorable court rulings and a reassessment. Analysts at HDFC Securities said that India's cement consumption grew 6% to 7% in the first quarter of the year, largely due to infrastructure spending. However, the demand began to moderate towards the end of the quarter. Ambuja reported that higher fuel, packaging, and diesel costs related to the conflict and weakness in currencies in West Asia weighed on the costs during the third quarter. These costs are expected to continue to increase in the first six months of the fiscal year. The company said that India's infrastructure growth story is fundamentally sound, but that the outlook for fiscal growth in 2027 is a bit softer due to geopolitical issues and an early forecast of below-normal rains. In a press release, CEO?Vinod Bhatty stated that he expected industry demand to be 5% for FY27. Elara Capital analysts see a slowdown in demand following the peak season. Seasonal?weaknesses in the June quarter may also impact profitability in the upcoming months. Revenue from operations increased 5.5% in the quarter reported, to 69.72 bn rupees. This was due to higher volumes and better pricing. UltraTech Cement, a larger?rival, posted a 'quarterly profit estimate that was exceeded last week. This was due to improved weather conditions and increased demand.
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Rhine River shipping is hampered by low water levels
Commodity traders reported on Monday that low water levels following a period of dry weather have prevented cargo vessels from sailing on the Rhine River in Germany with their full load. They will be charged a surcharge on top of the normal freight rate. The traders claim that low water levels are affecting shipping along the entire river south of Duisburg and Cologne. This includes the chokepoint at Kaub. At Kaub, the cargo vessels are only able to sail at a maximum of?50% capacity, while in the northern regions, they can travel up to?70% capacity depending on the vessel type. The Rhine is an important shipping route for commodities like?grains and minerals, coal, ores, oil products including heating oil. In shallow water, vessel operators will increase freight rates in order to compensate for the fact that vessels are not fully loaded. This increases costs for cargo owners. This also means that loads are spread across a number of vessels, which may be sailing partially loaded. The traders said that the rain forecast for 'the next week' in river catchment regions could mean some improvement is in sight. German companies will face production and supply problems after the 'drought and heat wave' of 2022, which led to abnormally low Rhine water levels. Michael Hogan, reporting from Hamburg and Kirsten Donovan editing the story)
MORNING BID AMERICAS-Strait talk
Anna Szymanski is the Editor-in Charge of Open Interest.
Prices of oil jumped by 5% after Iran claimed it had stopped a U.S. ship from entering the Strait of Hormuz. The U.S., however, denied Iranian claims that it was hit by missiles. This came after President Donald Trump announced that the U.S. was going to begin helping ships stuck in the Strait of Hormuz. The yen briefly rose?against?the dollar, as traders waited for more buying by Japan's Ministry of Finance following a suspected intervention last Thursday.
Below, I'll go into more detail. Listen to the Morning Bid podcast. Subscribe to the Morning Bid daily podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
STRAIT TALK Prior to the reports of the U.S. Warship being turned away from the Strait of Hormuz, on Monday President Trump described a plan for releasing stranded ships in the strait on Sunday as a "humanitarian gesture". The mechanics of the plan were left vague by Trump, but U.S. Central Command provided a sense for its size, stating that it would include 15,000 military personnel, and more than 100 aircraft, both land- and sea-based. Brent traded at $112/bbl, and WTI was around $106/bbl. Iran warned earlier that foreign forces crossing the Strait would be attacked. Iranian state media reported on Sunday that Washington had sent a reply, via Pakistan to Tehran's 14 point proposal to end the conflict - a proposal that Trump stated he would likely reject. As a result of the lack of progress in a 'peace deal', with the main sticking point being timing of the nuclear talks, the Gulf is likely to remain in a state of stalemate. The yen jumped again abruptly?on monday, reaching 155.7 per dollar before reversing course. This fuels speculation about another round of Japanese purchases after last week's apparent interventions, where the authorities may have spent up to $35 billion in order to support the flagging currency. Asia's stocks were up on Monday. South Korea's KOSPI, a tech-heavy index, surged almost 5%. SK Hynix's shares rose more than 12% as a result of the rising AI capital expenditures by U.S. technology firms. Japan's markets will be closed for Golden Week until Wednesday. After the opening, European shares dipped slightly. Automakers were under pressure following President Trump's Friday announcement that he will raise auto tariffs again. This is another crucial week for macro-data and earnings. Friday, the U.S. Non-farm Payrolls Report will be released. Median forecasts predict a growth of 60,000 jobs, which is well below March's 178,000. Despite the Fed's recent hawkish stance, the report is unlikely going to bring back hopes of rate cuts in 2019.
This week, tech giants AMD, Super Micro Computer, and Palantir are due to report their?earnings.
Spirit Airlines, a budget airline in the United States, ceased operation over the weekend when it failed to get creditor support for an American government bailout plan. This airline collapse, following a double-digit increase in fuel prices during the Iran War, is one of the last options for low-income Americans to travel by air. It could be considered the first corporate victim of the Iran War.
Oil tanker traffic in the Strait of Hormuz is down dramatically since the beginning of the war. Several ships have passed through the Strait of Hormuz in recent weeks and days, but average flows are still well below normal.
Watch today's events
* U.S. manufacturers' March new orders (10 am?EDT).
John Williams, New York Fed's John Williams.
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(source: Reuters)