Gold prices soared to a fresh all-time high on Monday while the US dollar weakened and global stock markets showed mixed performance, as investors reacted to escalating concerns over Donald Trump’s tariff threats and tensions with the US Federal Reserve.
With many financial markets still shut for the Easter bank holiday, trading activity was subdued ahead of a week expected to deliver key data revealing the early effects of the US-led trade war.
Several countries are scrambling to strike deals with Washington to limit the fallout from US tariffs, with Japan being the most prominent. Meanwhile, China issued a stern warning on Monday, advising governments against entering any agreement that undermines Beijing’s interests.
While most nations have been hit with a 10% blanket tariff, China is facing levies of up to 145% on numerous goods. In response, Beijing has imposed retaliatory tariffs of up to 125% on American imports.
“Appeasement will not bring peace, and compromise will not be respected,” a spokesperson for China’s commerce ministry said.
“To seek one’s own temporary selfish interests at the expense of others’ is to seek the skin of a tiger,” the statement added, warning that such a strategy would ultimately harm all parties involved.
Trump, speaking last Thursday, said the US was in talks with China and expressed optimism that a trade agreement could be reached. “Yeah, we’re talking to China,” he said. “I think we’re going to make a very good deal.”
Fears over the global economy’s trajectory sent investors rushing to safe haven assets, with gold breaking past $3,384. The precious metal’s surge was also supported by a weaker US dollar, which is under pressure following Trump’s latest public clash with Federal Reserve Chair Jerome Powell.
Trump last week criticised Powell for suggesting the tariffs would likely result in a temporary rise in inflation and for ruling out near-term interest rate cuts. The president went so far as to say: “If I want him out, he’ll be out of there real fast, believe me.”
Powell, however, has made it clear he has no intention of stepping down early, stating that the central bank’s independence is “a matter of law.”
The dollar declined against major currencies, with the yen and euro gaining ground.
French Finance Minister Eric Lombard remarked that Trump’s tariff actions had already damaged the dollar’s credibility. “If Powell is pushed out, this credibility will be harmed even more,” he warned, citing potential volatility in the bond markets.
Chicago Fed President Austan Goolsbee echoed those sentiments, telling CBS’s Face The Nation: “There’s virtual unanimity among economists that monetary independence from political interference is really important.”
Stock markets opened the week on a mixed note. Tokyo’s Nikkei fell, pressured by the stronger yen, while Shanghai, Seoul, Singapore, Manila, and Jakarta posted gains. Markets in London, Hong Kong, and New York remained closed for the holiday.
Oil prices dipped due to concerns over weakening demand, adding to anxiety about the global economic outlook.
Investors are now closely watching April manufacturing data releases worldwide for signs of how the tariffs are beginning to bite.
Stephen Innes of SPI Asset Management noted, “One thing that’s absolutely clear — and no longer debatable — is that the reputational hit to the US brand is real. It’s sticking.”
“Investors, allies, and even central banks are starting to bake in the idea that American policymaking, both fiscal and monetary, is now a geopolitical variable — not a given,” he added.
Key figures as of 02:30 GMT:
- Tokyo – Nikkei 225: DOWN 1.2% at 34,300.35
- Shanghai – Composite: UP 0.5% at 3,292.98
- Euro/dollar: UP to $1.1476 from $1.1371
- Pound/dollar: UP to $1.3353 from $1.3270
- Dollar/yen: DOWN to ¥141.03 from ¥142.33
- Euro/pound: UP to 85.94p from 85.68p
- WTI Crude: DOWN 1.7% at $62.91/barrel
- Brent Crude: DOWN 1.7% at $66.84/barrel
- London FTSE 100: Closed for a holiday
- New York Dow: Closed for a holiday
