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Rate cut bets are impacted by inflation worries as gold prices continue to fall
The gold price fell a second time on Wednesday, as inflation fears fueled by war weighed down on the expectations of interest rate reductions. Markets were also looking forward to Trump-Xi's upcoming meeting. At 09:05 am EDT (1305 GMT), spot gold fell 0.6%, to $4686.99 an ounce. U.S. Gold Futures rose 0.2% to $4694.70. U.S. Producer Prices increased more than expected during April. They posted their largest gain since early 2022. This is the latest sign that inflation has accelerated amid the Iran War. Peter Grant, senior metals analyst at Zaner Metals and vice president, said that inflation remains "sticky" and therefore, expectations of higher rates for longer were reinforced. This has led to gold's price being pushed up in the last two days. Gold is often seen as a hedge against inflation. However, higher interest rates can put pressure on the metal. Data released on Wednesday revealed that U.S. consumer inflation rose further in April. The annual rate posted its biggest gain in three year. Last month, the U.S. Central Bank left its benchmark interest rate at 3.50%-3.75%. CME Group's FedWatch reports that traders have priced in a rate cut by the U.S. this year. Donald Trump is on his first trip to China as a U.S. President in almost a decade, eager to make deals, maintain the fragile trade truce between?the second-largest economic power and boost public approval ratings that have been hurt by his war with Iran. India raised its import tariffs for gold and silver from 6% to 15% as part of an effort to reduce overseas purchases of metals. This will also help to ease the pressure on India's foreign exchange reserves. India is the second largest consumer of precious metals in the world. Grant stated that the news of higher import duties has caused some?demand worries and could be a long-term headwind. After hitting a session high of two months earlier, spot silver dropped 0.2% to $86.70 an ounce. Platinum fell 0.3%, to $2,120.20 after reaching its highest price since March 17. Palladium fell 0.4% to $1,484.10. Ashitha Shivprasad, reporting from Bengaluru and Alexander Smith, editing)
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India's increased tariffs on gold and silver are unlikely to affect demand
India, which is the second largest gold consumer in the world, raised its tariffs for gold and silver from 6% to 15%, as the Iran war strains New Delhi’s balance of payment. India imports nearly all its gold and has repeatedly tried to reduce consumption. India's weddings and festivals are a major part of its culture, so gold is a necessity rather than merely luxuries. Why is India targeting imports of gold and silver? India's current-account deficit is being impacted by imports of precious metals that New Delhi considers non-essential. The rupee has been impacted by the rising prices of gold and silver, which have increased the bill and led to a widening of external outflows. India spent $84 billion in gold and silver imports during the fiscal year ending March. This is up from $35.5 billion 10 years ago. India is the largest consumer of silver in the world. It's used for jewellery, coins, bars, and industrial applications from solar energy to electronic devices. In the last year, silver ETFs have seen record-high inflows, indicating that investment is driving demand more than jewellery or silverware. Do higher tariffs curb demand? Indian consumers are very price sensitive, and sudden price increases often cause them to delay their purchases. The annual demand for gold has been relatively stable at 666-803 tons on average, even though local prices have risen by 443% in the last decade. The demand remained resilient even when India increased gold import tariffs from 2% to 10% between 2012 and 2013 Buyers are unlikely to stop buying gold because of a tariff increase. Indian households purchase gold to protect themselves against inflation, currency weakness and long-term value. In rural areas, farmers use it for financial protection during times of crisis. Banks and finance companies offer credit in minutes to millions of Indians. Which Gold Demand Segment Will Be Hit Hardest? India's gold consumption is dominated by jewellery demand, which accounts for 75%. The rest comes from investment, in the form of coins, bars, and gold ETFs. The demand for jewellery has already weakened due to high prices. Further increases are likely in the near future and will push buyers toward lower-carat pieces. Investors buy gold to anticipate price increases, while Indians view it as a safe haven and an inflation hedge. The higher tariffs increase?local prices and make gold a more attractive asset. In addition, rising prices can attract new investors who are worried about missing out on future gains. In the March quarter, investment demand for gold exceeded jewellery consumption for first time. Investors turned to the metal due to weak equity returns. Inflows to local gold ETFs are expected to continue rising. Will the TARIFF RISE Spur Gold Smuggling? The latest duty increase has increased the margins of so-called grey markets to 18% from around 9%. New Delhi reduced tariffs in 2024, and the unofficial gold imports dropped sharply. The gold imports dropped from 156.1 tons to 69.2 tonnes in 2024, then further to 20.4 tons in 2020. The margin for smuggling one kilogram of gold is now at a record high 3 million rupees. This creates a greater incentive for gray market operators.
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India has cleared a $3.9 billion plan to convert coal to gas in order to reduce the reliance on imported fuel.
Ashwini Vaishnaw, India's Information Minister, said that the cabinet had approved a scheme worth 375 billion rupees ($3.92billion) to promote coal gasification, which will reduce reliance on imported fuels, and use domestic coal for cleaner industrial purposes. The Cabinet decision seeks encouragement for the conversion of coal to synthetic gas, which can be used in power production, fertiliser production, petrochemical applications, and other industrial applications. Vaishnaw, who spoke on Wednesday, said that this would, in turn, help India reduce its imports of liquefied gas (LNG), ammonia, urea and methanol. India's gas exports have been affected by the Middle East conflict. As part of their efforts to reduce emissions, several countries, such as the United States and China are also exploring coal gasification technology. India has a coal reserve of 401 billion tons, and a lignite reserve of 47 billion tons. The country aims to gasify 75 million metric tonnes of coal per year. The government will provide financial support of up to 20% of the costs of plant and machinery. Power producers are becoming more interested in this sector. NTPC, a state-run power company, is 'looking to enter coal gasification, with plans to produce between five million and ten million tonnes of synthetic 'gas per year over the next three or four years, according to a report last year. In 2024, India approved a 85 billion rupee incentive scheme for coal gasification.
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Aluminium nears 4-year high and copper continues to push towards record January high
Due to 'bullish technical indicators and the outperforming of prices in the U.S. The benchmark three-month 'copper' on the London Metal Exchange rose 0.8% to $14138 per metric ton, in open-outcry official trading, following a record-breaking close on Tuesday. The LME index of six base-metals contracts closed on a record on Tuesday, with copper moving closer to the intraday record of $14,527.50 that was set on January 29. Prices for the entire complex were also strong. Bets on the future growth of demand for copper are a good way to support the price. Recent strong factory data is also a great way to ease concerns about the Middle East conflict and the availability of sulphuric acids. The Yangshan premium copper The price of copper in China has risen by 3%, to $72 per tonne, the highest level since mid-April. This indicates that demand is still strong, despite higher prices. The most active COMEX copper futures for July gained 1.8%, reaching a record-high of $6.6485 per lb. The U.S. copper market is currently trading at about $500 per ton more than the LME, with Washington expected by the end of June to decide whether or not to impose tariffs on imported refined copper. The anticipation of policy actions is drawing metal to the United States, and tightening the availability elsewhere. This adds another layer of support for the global market, Neil Welsh, the head of metals of broker Britannia Global Markets said in a note. LME?aluminium prices rose 2.4% in official trading to $3 649 per ton after hitting $3 657, the highest level since April 16. Metal is nearing its highest level in four years, as the Iran War disrupted Middle East producers' supply. Daily LME data shows that after Malaysia's 30,000 new cancellations, the on-warrant aluminum stocks in LME registered warehouses dropped to 301.722.5 tons. Zinc increased by 0.1%, to $3,535. Lead, on the other hand, rose by 0.4%, to $2,004.5. Both metals reached their highest levels since late January. Nickel increased 1.5% and tin gained 1.7%. Chinese companies in Indonesia, a giant nickel producer, warned that local tax increases and tighter ore quotas would threaten their investment. (Reporting and editing by Shreya Biwas; Polina Devitt)
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Shipping data shows that India's HPL is turning to Oman for naphtha due to the disruption caused by the Iran war.
According to shipping data and industry sources, India's Haldia Petrochemicals has turned to Oman in order to compensate for a shortage of naphtha from Kuwait and Qatar due to the Middle East conflict. The loading ports of Oman are located outside the conflict zones and have not been affected by the war. According to the cargo tracking of?consultancy Energy Aspects, the medium-range tanker Rarity?loaded around 23,000 metric tonnes (201,000 barrels), of naphtha?late March and discharged it at Haldia on April 13. Navanit Narayan said, "We are actively sourcing multiple options for naphtha and continually?monitoring? the evolving situation" in response to an email asking for comment. She did not mention specific countries. Haldia Petrochemicals purchases naphtha from Middle East refiners and Kuwait Petroleum Corporation to fuel its 700,000-ton-per-year cracker located in India's Haldia, in the state of West Bengal. KPC declared force majeure on shipments of crude and refined products?on April 17, 'a notice examined by showed. Qatar Energy reported that it was having problems loading naphtha after declaring force majeure at its LNG plant, an Asian buyer stated. First source: HPL also tries to buy small parcels?of?naphtha?from the United Arab Emirates. The Chatterjee Group, a U.S.-based firm of private equity, owns the majority of the company. (Reporting and editing by Philippa Fletcher; Mohi Nrayan)
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Chinese firms warn that nickel quotas and tax increases in Indonesia will threaten investment
Chinese companies in Indonesia are calling for more business-friendly policy, warning that tighter nickel ore quotas and higher taxes, as well as a new pricing formula, are driving costs up, and threatening investments in the world's largest nickel producer. China Chamber of Commerce in Indonesia, in a letter sent to President Prabowo, and copied to China's Embassy, said that Chinese firms were subjected to "excessively strict regulation and over-enforcement" and that authorities were allegedly corrupt and engaged in extortion. Five sources who were familiar with the issue confirmed the letter. They requested anonymity as they weren't authorised to speak in public. The complaint highlights tensions that exist between Jakarta's desire to extract more value out of its natural resources, and the Chinese capital which has driven Indonesia's rapid growth in global nickel supply. The letter mentioned higher taxes and 'royalties', planned foreign exchange retention rules, stricter enforcement of forestry, work visa restrictions, and suspensions for major projects. The strongest warning was directed at?nickel where Chinese firms dominate downstream after years of investing in smelters and stainless steel plants as well as battery-material projects. The chamber reported that nickel ore mining quotas were drastically reduced in this year. For large mines, reductions exceeded 70%, and the total was 30 million metric tonnes. The report also criticised Indonesia’s revised nickel ore price benchmark formula, known as HPM. It said the changes could have increased costs and undermined existing projects. The government has decided to delay planned increases in mineral royalties and export duty while it develops what officials describe as a 'fairer formula' for the state and miner. Prabowo, in a statement earlier on Wednesday said that many foreign investors complained Indonesia required too many licenses?and approvals were taking too long. He called for deregulation, to support investment. The chamber failed to respond to a request for comments sent via email. Prabowo's spokesperson did not respond to a message sent via text requesting comment. Tsingshan, Zhejiang Huayou Cobalt and Brunp are members of chamber boards that operate nickel plants in Indonesia. (Reported in Shanghai by Dylan Duan, Gayatri soroyo and Gibran Peshimam. Tom Daly and Christina Bernadette contributed additional reporting from Jakarta and London. Mark Potter (Editing)
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Trump and Xi will consider tariff reductions on $30 billion in imports as part of a managed trade effort
This week, the U.S. will likely move closer to a managed trade system for non-sensitive products. Each side may identify $30 billion in goods that they can reduce tariffs on and sell to one another without violating national security redlines. U.S. -Trade Representative Jamieson Greer first proposed the "Board of Trade", a "deliverable agreement" for this week’s high-stakes'summit' between U.S.-President Donald Trump and Chinese-President Xi Jinping. The plan's contours are still sketchy but there is a clear shift in the dialogue: Washington no longer demands that Beijing change its export-driven and state-directed economic model into one more similar to the U.S. market-driven model. Instead, efforts are focused on quantitative trading targets in nonstrategic areas while maintaining broad tariffs and controls on technologies that affect national security. GREER'S "ADAPTER" APPROACH Greer said last week that it's not a case where we can go to China and change their way of managing their economy or the way they run the country. "That's baked into their system. But I think we can find ways to optimize trade between China & the United States in order to achieve more equilibrium." He compared the mechanism to an "adapter plug" that could help connect two economic systems incompatible. The U.S. Treasury Secretary Scott Bessent met with the Chinese Vice Premier He Lifeng for three hours on Wednesday in Incheon. They were there to finalize economic proposals that Trump and Xi would discuss in Beijing. The two top 'economic officials have not released any statement about their initial meeting. Four people who are familiar with Trump's goals said that they expect a framework agreement of $30 billion for every $30 billion in trade barriers to be launched by the new mechanism. It's not clear if Trump and Xi will agree on specific goods or if this will happen in future meetings. Wendy Cutler is a former USTR Negotiator and the Director of the Asia Society Policy Center, Washington. She said that both sides are "coalescing" around a $30-$50 billion basket of goods in exchange for lower tariffs or other barriers. "The non-sensitive basket is just a tiny part of our total trade with China." Cutler said Tuesday at a virtual Asia Society Forum that the Board of Trade could start with this and then expand in future. According to U.S. Census Bureau statistics, the U.S. two-way trade in goods between China and the United States fell by 29%, to $415 billion, from $582 billion, in 2024. The U.S. deficit trade dropped nearly 32%, to $202 billion, in 2025. This was its lowest level in over two decades. The U.S. Trade Representative and U.S. Treasury declined further comment on the proposed mechanism before the Beijing Summit. China has not used the Board of Trade name, but said that in March they had "agreed" to "explore the establishment of working mechanism to expand economic and trade cooperation", without providing any further details. Energy and agriculture are the focus of attention. The U.S. is looking to increase its sales to China. Beijing's tariffs that disrupt these commodities could be one way to do this. China has a 10% general tariff on all U.S. imported goods, which is the same as the temporary 10% U.S. tariff on Chinese products. Beijing has imposed retaliatory tariffs on U.S. imports of crude oil, coal, liquefied gas and beef in addition to the existing "most-favored nation" tariffs. The U.S. The?U.S. Flat-panel TV sets, Bluetooth headphones, Bluetooth speakers, multifunction printers, bed linens, and flash memory devices are among the products that have been subjected to tariffs of 7.5%. These duties are topped off by the 10% temporary global U.S. duty, which expires in July. The U.S. could also revive some of the?more 2,200 product-specific exemptions from China tariffs that were granted during Trump's initial term, but have since mostly expired. Trump extended temporary tariff exemptions for a year in November 2025 on solar manufacturing equipment, 164 industrial and medical product categories from printed circuit boards to electric Motors and Blood Pressure Monitoring Equipment. Some of these exclusions could become permanent. BOARD OF INVESTMENT Both sides will also discuss the less developed concept of a “Board of Investment” to address investment issues. Greer, however, told the Hudson Institute in a recent interview: "I do not think that we are at a point where we can talk about large investment programs." U.S. lawmakers and representatives from the automotive, steel, and tech industries have warned Trump to avoid any deal which opens the door for Chinese investment in U.S. vehicles. They argue that such a deal would erode the core of U.S. Manufacturing. (Reporting and editing by David Lawder.)
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Military intelligence reports that Russia has launched an air strike on Ukraine's infrastructure.
The HUR military intelligence agency reported that on Wednesday Russia launched a likely?long-lasting air strike on Ukraine's critical infrastructure facilities. The President of Ukraine, Volodymyr Zelenskiy, had warned earlier of possible Russian drone attacks all day long. He said that there were more than 100 drones in Ukraine's airspace. HUR reported that in the first wave of attacks, Russia used a significant number of drones and ballistic missiles to attempt to overwhelm Ukraine's defense system. The statement warned that the attack could last for a long time. The agency stated that Moscow targets critical infrastructure in major cities including energy, defence industries, government buildings and other essential services. Air Force Issues Warnings to Several Regions Ukraine's airforce issued warnings about groups of drones headed towards various Ukrainian regions. Since the start of the war, more than four years ago, Russia has carried out most'major drones and missile strikes in the night. In recent months it has sent more drones and missiles at daytime. Serhiy Bekstnov, an advisor to the Defence Minister, said that Wednesday's attack was a sign that Russia is trying to change their tactics and stop using drones. He said that this time, drones were flying between 5 and 10 kilometers from the Belarus border to overwhelm Ukraine's system of air defence so as to allow as many people as possible to get to the western part of the country. The governor of the region said that there were three people injured in an attack on western Khmelnytskyi. A local official reported that a Russian drone attacked a city bus in Kherson, a southern city which is regularly subjected to Russian?attacks and shelling. Six passengers and the driver were injured. The regional governor confirmed that two other people were injured in the attack in Odesa. The mayor of Kyiv said that drone debris fell on an open area in the northern Obolon District. Ukraine's Air Force reported that Russia had attacked the country overnight with 139 drones since?6 pm (1500 GMT), of which 111 were?downed or neutralised. Moscow has denied that it deliberately targets civilians, but thousands have been killed during the war. It also says that strikes on civil infrastructures are justified if they reduce Ukraine's capability to fight. Kyiv recently intensified its long-range attacks against Russia's energy sector, though at a smaller scale. (Reporting and editing by Peter Graff, Alison Williams and Anna Pruchnicka)
European stocks are rising, but oil prices remain stable and government bond yields remain high
European stocks rose Wednesday, and Wall Street is set to open higher as markets recover from previous losses. However, bond yields remain high as hope for a peace agreement between the U.S.
Wall Street stocks dropped from their recent record highs after U.S. data on inflation showed that consumer prices had risen the most in three year, mainly due to an increase in energy costs.
The data showed the impact of the U.S.-Israeli war on Iran and drove up government bond yields as traders believed it would increase the likelihood that central banks might be forced to hike rates earlier than expected.
The market sentiment was impacted in Asian trade. However, signs of recovery were evident by 1102 GMT with Europe's STOXX600 up 0.3%. London's FTSE 100 remained unchanged. Nasdaq futures rose 0.7%, according to Wall Street futures.
The 10-year U.S. Treasury was still at 4.4629% after reaching its highest level since late March. Japan's 5-year and 20 year government bond yields reached new records overnight.
Brent crude was up 0.2% to $108.03 per barrel, while West Texas Intermediate fell 0.1% to $102.11 per barrel.
International Energy Agency (IEA)'said that global oil supply would fall short of the demand this year as war has ravaged Middle East oil production. Both sides have failed to reach an agreement on a ceasefire and Israel has intensified its attacks in Gaza over the past five weeks.
Amelie Derambure said that markets were in a "wait-and see" mode, as they waited for the U.S. president Donald Trump to meet with his Chinese counterpart Xi Jinping later this week in Beijing.
She said that the preferred scenario would be for China to influence a ceasefire in Iran or peace, but this is considered unlikely.
This would be more of a positive surprise than the current market scenario.
Trump stated on?Tuesday that he didn't think he needed China's assistance to end the conflict.
Several ships have passed through the Strait of Hormuz. On Tuesday, it was reported that Iraq and Pakistan had cut deals with Iran to ship oil from the Gulf and liquefied gas. This shows Iran's control over energy flows in the Strait.
Derambure stated that investors expect the Strait to open in the summer. However, the market is "digesting" the idea that it could take longer than expected last week.
Energy prices have risen in Europe and the U.S. but consumers are feeling the strain.
The U.S. earnings were also boosted by the technology companies' investments in artificial intelligence.
"There is still this belief that equities - except in a recession but that's on no one's radar for the moment - are better positioned to resist, or to perform decently, ?in this higher-inflation stronger-nominal-growth environment," Derambure added.
As Prime Minister Keir starmer's hold on power began to wane, gilt yields in Britain?surged. The yield on the?10-year bond was 5.093%.
The dollar index stood at 98.496, a 0.2% increase on the day, and the euro fell 0.2% to $1.1711.
The Japanese yen is at 157.82 against the U.S. Dollar, after briefly rising on Tuesday due to "rate-check" speculation. This is often seen as an indication of a possible intervention.
Gold prices fell 0.4% to $4,692 per ounce. Reporting by Elizabeth Howcroft. Clarence Fernandez, Mark Potter and Clarence Fernandez edited the report.
(source: Reuters)