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What drives the gold market and how investors buy it?
Gold reached a record-high above $2,900 an ounce on Sunday as investors fled to the precious metal in fear of a global trade war sparked by U.S. president Donald Trump's recent tariff announcements. Bullion prices are up over 10% and have broken records seven times this year. Market bulls are now aiming for $3,000 an ounce, the next psychological barrier to be breached. Here are some different ways to invest in Gold: SPOT MARKET Big banks are usually the gold buyers for large investors and large buyers. The spot market is determined by the real-time dynamics of supply and demand. London has the largest influence on the spot gold markets, thanks to the London Bullion Market Association. The association establishes standards for gold trading, provides a framework for over-the counter trades, and facilitates transactions between banks, dealers and institutions. China, India, Middle East, and the United States, are also major gold trading centers. Futures Market Futures exchanges are another way for investors to get exposed to gold. They allow them buy or sell commodities at a set price, on a specific date in the future. COMEX, part of the New York Mercantile Exchange (NYMEX), is the world's largest gold futures exchange in terms of volume of trading. Shanghai Futures Exchange (China's largest commodities exchange) also offers gold contracts. Tokyo Commodity Exchange, also known as TOCOM is another major player on the Asian gold market. Exchange Traded Products Exchange traded funds or products that are backed by metal can be used to get exposure to gold without having to take delivery of it. Exchange traded funds are a significant category of demand for precious metals. The World Gold Council reported that physical gold exchange-traded fund holdings dropped by 6.8 tons in 2024. This was their first net inflow in 4 years. BARS AND COINS Metals traders can sell bars and coins to retail consumers in a store or online. Both gold bars and coins can be used to invest in physical gold. DRIVERS: Investor Interest and Market Sentiment The price of bullion has moved up due to the increased interest in investment funds over recent years. Market trends, global news and events can influence the sentiment that leads to speculation in gold. FOREIGN WAGE RATES Gold is an excellent hedge against the volatility of currency markets. Gold has historically moved in the opposite direction of the U.S. Dollar, since a weaker dollar makes gold priced in dollars cheaper for holders other currencies. MONETARY POLICY & POLITICAL TENSE In times of uncertainty, precious metals are widely regarded as a "safe-haven". Donald Trump’s trade tariff threats and the imposition of extra duties on Chinese products have sparked fears of an international trade war. They also rattled currency markets, and sparked fears of an increase in U.S. Inflation. Trump announced on Sunday that he would impose new 25% tariffs on steel and aluminum imports, along with reciprocal tariffs that target imports from many countries. The gold price is also affected by the decisions of global central banks. Gold is less expensive to hold when interest rates are lower, since it does not pay interest. CENTRAL BANK GLOBAL GOLD RESERVES Gold is part of the reserves held by central banks. The demand for gold by central banks has been high in recent years due to macroeconomic and political uncertainties. In its annual survey, conducted by the World Gold Council in June, it was revealed that more central banks intend to increase their gold reserves in the next year despite the high price of the precious metal. The World Gold Council reported that global gold demand including over-the counter trading rose by 1% in 2024 to a new record high. It also said that central banks increased their purchases in the fourth quarter. (Compiled and edited by Christina Fincher; Bangalore Commodities and Energy Team)
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The US copper premium has reached a record high after Trump tariffs
Copper prices in the United States soared Monday, after U.S. president Donald Trump announced his intention to impose tariffs on industrial metals. By 1820 GMT the premium between U.S. Comex Copper Futures and those traded on London Metal Exchange had risen to a new record of $920 per ton, up from $558 last Friday. Trump is expected to announce new tariffs of 25% on all imports of steel and aluminum, on top existing metals duties. This would be a major step in his trade policy shake-up. Last week, Trump announced that he would also impose tariffs against copper. He did not provide any details. Since Trump was elected president, Comex Copper has traded at a higher premium than the LME. This premium ranges from around $250 to $500, as investors tried to factor in the potential impact of tariffs. The gap widened on Monday, as traders scrambled in order to keep up with the news. Benchmark Minerals Intelligence stated in a report that "the price arbitrage between COMEX and LME reached an all-time record today, as traders continued pricing in the implementations of copper import tariffs into the US." It said that the premium implied the market was pricing the equivalent of a 10,5% tariff on Copper. Due to a short-squeeze, the Comex copper reached an all-time record of $5.1985 per lb in May 2024. During that time, the parties were forced to either buy back their short positions for a loss or to deliver actual copper to close them. (Reporting and editing by Tomaszjanowski, Polina Devitt and Eric Onstad)
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Ecuador's bonds tumble after election stalemate
Ecuador's government bond prices plunged Monday, after a tight result in the presidential election surpassed market expectations of a victory for Daniel Noboa. The center-right Noboa, and his main opponent, the leftist Luisa González, both secured 44% of the vote on Sunday, which means the race will now go to a second round on April 13. Analysts warned of the uncertainty in Quito. The main bonds for 2030, 2035, and 2040 fell between 5.0 to 10.6 cents per dollar or 8% to 16%. JPMorgan stated in a report that "we hold our excess in Ecuador, but we acknowledge the market may initially correct itself due to the perception of a greater binary risk." The performance of Ecuadorean bonds was among the best across all sovereigns. This is partly due to a more stable and effective government that Noboa established in November 2023 following a snap general election. The bonds rose 17% through Friday, after gaining nearly 70% at the index-level in 2024. Some polls had Noboa winning the first round. Noboa is the market's favourite candidate because of his efforts to combat violent drug gangs in Ecuador and long-standing debt problems, said Graham Stock. He's a senior emerging markets strategist at RBC BlueBay. Stock stated that "it is a very disappointing result for market" and added that Noboa's and Gonzalez's near 90% vote share meant the second round would be a "scramble". Leonidas Iza was the third-place candidate, an indigenous leader from the Pachakutik Party who received 4.8% of the first round votes on Sunday and had been critical of government environmental records. Tellimer Research analysts gave Gonzalez a slight edge in the run-off because they downgraded Gonzalez's debt to "sell", arguing that Gonzalez's coalition was more fragmented. Since the early 2000s, the country has not been able to access international capital markets. However, it recently completed its second high-profile swap of debt for nature with the support of the Inter-American Development Bank (IDB) and the U.S. Government's International Development Finance Corporation. Reporting by Marc Jones, Rodrigo Campos and Toby Chopra; Editing by Hugh Lawson, Toby Chopra and Sharon Singleton
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Trinidad increases revenue from LNG sales following contract revamp
Stuart Young, the energy minister of Trinidad and Tobago (the largest producer in Latin America and Caribbean) said that the government is generating more revenue through LNG exports. The cargoes are sold at a price between 15 and 55 percent above the Henry Hub, he added. After five years of negotiation, the increase is a result of a revamped contract in late 2023, which set new financial conditions for participants in Atlantic LNG, the country's flagship LNG project. Prior to the revamp, LNG production in Trinidad barely reached prices near Henry Hub for cargoes that were sold to customers throughout Europe, Asia, and South America. The country has pressed producers, particularly offshore, to deliver the first output of new projects in order to increase gas supplies to Atlantic LNG. A lack of gas has caused one of the liquefaction train's at the facility to remain idle in recent years. Young said that Shell's Manatee and BP Cypre are two of the most important gas projects offshore. Both are expected to produce up to one billion cubic feet of gas by 2028. Trinidad launched last month its largest ever auction of deepwater oil and natural gas exploration and production zones in an effort to ensure future output. The Trinidadian government hopes that the new administration under Donald Trump will preserve two important U.S. licences for joint projects in Venezuela, which are expected to provide gas for LNG production as well as exports from this Caribbean nation. As many European countries continue to impose carbon taxes on the import of petrochemicals, a larger revenue from LNG exports may help offset a predicted hit in sales of ammonia or methanol. Carbon taxes have been implemented in more than 20 European nations, mainly since 2023, to reduce carbon emission. David Cassidy said that the European Union has a unique decarbonization strategy. No one else is following it, he added.
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Minister says Colombian deforestation will be lowest in 23 years in 2024.
According to Environment Minister Susana Muhamad, the deforestation rate in Colombia is projected to increase in 2024 compared to the previous year. However, it is still expected to be one of the lowest rates in over two decades. According to the Environment Ministry, deforestation decreased by over a third, from 1,235 square kilometers to just 792 square km (305 square miles) by 2023. Muhamad warned last year that 2023's success would not be repeated due to drought and the breakdown of talks with rebels who, according to the government, are fueling illegal logging and road construction, as well as cattle ranching. Muhamad announced her resignation Sunday, but she has yet to be replaced. She led efforts to reduce deforestation, after the destruction of Colombia's Amazon ecosystem and other ecosystems increased during former President Ivan Duque's administration. Muhamad said that the figure for 2024 would be the lowest in 23 years. Muhamad said that her resignation was "irrevocable" over the appointment by President Gustavo Petro of a controversial advisor. Muhamad said that it is too early to speculate about her successor, but she and her team are working to prepare the ground for her successor. Muhamad is one of Petro's longest-serving cabinet members. She said that she was proudest of her work in deforestation, and the UN COP16 Biodiversity Summit, which took place in Colombia at the end of last year. The summit concluded with a plan that would charge pharmaceutical companies and other companies who use genetic information for the development and research of new commercial products. However, there was no agreement on how to raise $200 billion in annual conservation funding by 2030. Muhamad has said that she intends to stay in her position until the conclusion of the biodiversity talks, which will take place in Rome later this month. Reporting by Oliver Griffin Editing and Marguerita Choy
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Oil prices climb despite trade war concerns
The oil prices recovered on Monday, after a third consecutive week of declines. Investors remained concerned that U.S. president Donald Trump could start a new trade war. Brent crude futures rose $1.30 or 1.7% to $75.96 per barrel at 11:51 am. ET . U.S. West Texas Intermediate Crude added 1.9% and rose $1.36 to reach $72.36. Gains could be due to bargain-hunting after prices dropped 2.75% in the previous week as a result of global trade concerns. Tariff uncertainty is the main issue. Harry Tchilinguiran, of Onyx Capital, said that this affects risk appetite and spillover effects to oil. Some people might be buying the dip after last week's declines. The Russian Federal Anti-Monopoly Service could also impose a one-month export ban on gasoline by large producers to stabilize wholesale prices before the planting season. This would help boost prices. Dennis Kissler is the senior vice president for trading at BOK. He said that "tighter supplies" of Russian crude and gasoline exported to Middle East has led to a rise in Middle East crude cash prices today. Trump announced that he would announce 25% tariffs on steel and aluminum imports to the U.S. on Monday. He announced tariffs against Canada, Mexico, and China a week ago, but then suspended them for neighbouring countries a day later. Tariffs can dampen the global economy and energy demand. The market has realized that tariff headlines will likely continue in the coming weeks and months, said IG analyst Tony Sycamore. He added that they may be retracted or increased at any time in the near term. Investors may be coming to the realization that it is not wise to react negatively to headlines. China's retaliatory duties on certain U.S. imports are set to go into effect on Monday. There is no progress yet in the talks between Beijing Washington. Oil and gas traders want Beijing to waive import duties on U.S. crude oil and liquefied gas (LNG). Trump stated on Sunday that progress is being made by the U.S. and Russia in ending the Ukraine conflict. Russia's representative for U.S. relations said Monday that President Vladimir Putin must have all his conditions met before the war ends. The sanctions imposed by the United States on Russian oil on January 10, 2010 disrupted Moscow’s supply to its main clients, China and India. Washington increased pressure on Iran as well last week. The U.S. Treasury issued new sanctions against a few individuals, and on tankers that assist in shipping Iranian crude oil to China. These sanctions against Iran and Russia are biting. Bjarne Shieldrop, SEB analyst, said that this is tightening up the market. He added that rising natural gas prices also contribute to oil price increases by increasing demand for cheaper fuels. Citi analysts predict that Brent crude will average $60-$65 per barrel by the second half 2025, because Trump is determined to reduce energy prices. He will also prove to be an adverse influence on the market. (Reporting and editing by Susan Fenton and David Goodman)
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The dollar edged up and stocks rose as the latest tariffs swirled
The dollar rose slightly after U.S. president Donald Trump warned about additional tariffs including those on steel and aluminum. Meanwhile, a global stock index shook off worries over more duties to advance. Trump told reporters aboard Air Force One that he will announce 25% tariffs on steel and aluminum imports to the U.S. on Monday, and other reciprocal tariffs shortly thereafter. China's retaliatory duties on certain U.S. imports will take effect Monday. There are no signs of progress in a new agreement between Beijing and Washington. The dollar index (which measures the greenback in relation to a basket of currency) rose 0.13%, reaching 108.23. Meanwhile, the euro fell 0.13%, at $1.0312. Marc Chandler, Bannockburn Global Forex's chief market strategist in New York said: "This is very early days." The market is just sort of moving around, rather than being really directional at the moment. The dollar gained 0.17% against the Japanese yen while the pound fell 0.16%, to $1.2386. The Canadian dollar fell 0.27% against the greenback, to C$1.43, and the Mexican peso dropped 0.37% in relation to the dollar, at C$20.642. This was due to the greenback retreating from its earlier highs. Wall Street saw gains on U.S. stock markets, mainly in the tech and energy sectors. The S&P 500 Materials index rose by 0.2%, boosted by gains of over 5% at steel companies Nucor Steel Dynamics. After the fast food restaurant announced its quarterly results, shares of McDonald's rose as well. MSCI's global stock index rose by 4.77 points or 0.55% to 874.21, and is on course for its fourth increase in the last five sessions. Europe's STOXX 600 Index rose 0.63%, hitting an intraday record value of 546.34. The STOXX 600 Index for Europe rose by 0.5% on Saturday after falling 0.38% the previous day. Stocks of several European steelmakers rose, reversing declines earlier. These included Luxembourg's ArcelorMittal, and Germany's Salzgitter. Analysts are worried that tariffs will rekindle inflation in the United States, and remove flexibility for the Federal Reserve to reduce interest rates. This is a potential outcome which could help support the U.S. Dollar since Trump's election. According to CME's FedWatch Tool, the markets expect the Fed to keep rates unchanged at its meeting in March. Expectations for a rate cut of at least 25% basis points will not rise above 50% until June. Morgan Stanley's chief U.S. economic Michael Gapen stated in a client note that the recent tariffs had raised the bar and the firm expects to only make one rate cut this year at its June meeting. The Fed chair Jerome Powell will be speaking to the Senate Banking, Housing and Urban Affairs Committee on Tuesday. It is likely that his comments on inflation and tariffs will be closely watched. The yield on the benchmark 10-year U.S. notes dropped 1.8 basis points, to 4.469%. This was in response to comments made by Trump on Sunday indicating that his administration might examine Treasury debt payments looking for fraud. Oil prices recovered despite persistent fears of a global trade war. U.S. crude oil rose by 1.49%, to $72.06 per barrel. Brent was up by 1.29%.
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Gold bulls have their sights set on a $3,000/oz milestone
The latest tariff threats from U.S. president Donald Trump have sparked a new gold rush. This has pushed the metal into new heights, and brought the $3,000 milestone within reach. On Monday, spot gold reached a new record of $2,911,30 per troy ounce - the seventh highest level in 2025. Prices have risen by nearly 11% this year, after a 27% increase in 2024. Trump announced on Sunday that he would impose new tariffs of 25% on all imports of steel and aluminum into the U.S. He also said he would announce reciprocal tariffs which will apply to all countries, matching the tariff rates imposed by each. "Gold clearly targets the $3,000 mark and the market has been incredibly strong - almost unrelenting. Ross Norman, an independent analyst, said that it is now a matter of when the market will reach this level. The underlying momentum of the market is so strong that one would expect to see some retracement. But we have never seen it. Tariff plans are generally viewed as inflationary, and capable of igniting trade wars. This increases the demand for safe haven assets such as bullion. Bullion is traditionally seen as a hedge against geopolitical instabilities and inflation. US PREMIUM The fear over the import tariff plans manifested itself in U.S. Gold Futures. Key contracts are currently trading at a higher price than the spot price of about $28. Sources say that London's bullion players are rushing to borrow gold from the central banks in London which store gold bullion, after a spike in gold deliveries into the United States. Gold in the Bank of England vault trades at a lower price than the market. The ANZ bank's senior commodity strategist Daniel Hynes said that the queues for withdrawing gold had lasted for weeks. To capitalize on this unusually high premium, global bullion banks fly gold to the United States, from trading hubs that cater to Asian consumers including Dubai and Hong Kong. COMEX approved warehouses for gold The gold price was 34.60 millions ounces. This is a 90% increase since late November and the highest since June 2022. London Bullion Market Association reported also on Friday that due to an influx of shipments into the United States, the amount gold stored in London vaults dropped 1.7% from one month to another to 8,535 tons worth $771.6 Billion in January. CENTRAL BANK DENDER Analysts and traders noted that the central bank demand in 2025 will continue to be robust and drive prices higher. In a report published quarterly, the World Gold Council said that central banks will buy more than 1,000 tonnes of gold in 2024 for the third consecutive year. The WGC calculated that in the fourth quarter of 2024 when Trump won the U.S. elections, central bank purchases increased by 54% on an annual basis to 333 tonnes, based both on reported and estimated unreported purchases. China's central banks added gold to their reserves for the third consecutive month in January, according to official data. Han Tan, chief market analyst at Exinity Group, said that the PBoC's decision in January to resume its bullion buying, as well as China's decision allowing insurance funds to invest in gold now, appear to have boosted bullion's bullish movement. China's financial regulator announced that as part of a trial project, some of the country's insurance funds will be allowed to purchase gold for medium and long-term assets.
Iron ore falls as Trump's tariff threats spur risk-off sentiment
Iron ore futures declined on Monday, as the latest tariff threats from U.S. president Donald Trump triggered a broad risk-off mood. However, signs of recovering China demand limited losses.
As of 0247 GMT, the most traded May iron ore contract at China's Dalian Commodity Exchange slipped 0.24% to $818 yuan (US$111.94) per metric ton.
As of 0237 GMT, the benchmark March iron ore traded on Singapore Exchange was down 0.32% at $106 per ton.
Trump announced on Sunday that he would impose new 25% tariffs on steel and aluminum imported into the U.S. on top of metals duties already in place. This is a major step up of Trump's trade policy overhaul.
The price declines were halted by signs that the demand for the main steelmaking ingredient had increased.
The average daily hot metal production among the steelmakers surveyed increased by 1.3% compared to the previous assessment before China's Lunar New Year break, to 2,28 million tons on 5 February.
From January 28 to February 5, the Chinese Lunar New Year holiday closed all markets.
Iron ore demand is usually gauged by the hot metal production.
Coking coal and coke, which are used to make steel, also fell on the DCE. They dropped by 0.74% each and 2.25 percent.
The benchmarks for steel on the Shanghai Futures Exchange are weaker. Rebar fell by 1.25%; hot-rolled coils dropped by 0.98%; wire rod was down 1%, and stainless steel declined 0.75%. ($1 = 7,3075 Chinese Yuan) (Reporting and editing by Amy Lv, Lewis Jackson)
(source: Reuters)