HG MARKETS:

Gold prices saw a slight decline during Asian trading on Wednesday but remained close to their record highs due to U.S. President Donald Trump’s threat to introduce more tariffs on crucial imports. The uncertainty around Federal Reserve’s future interest rates has increased as the market awaited further signals from the Federal Reserve, with the central bank set to release the minutes of its January meeting later in the day.

In recent days, gold prices have stayed within a narrow range near historical highs, as market sentiment has been influenced by a reduction in demand for safe-haven assets. This shift was partially driven by reports of potential peace negotiations between Russia and Ukraine, mediated by the United States. Additionally, investors have shown some resilience to the rising trade tensions, particularly Trump’s renewed tariff threats. Spot gold dropped by 0.2%, settling at $2,929.per ounce, while April gold futures experienced a slight decrease of 0.1%, ending at $2,946.per ounce.

On Tuesday evening, President Trump announced his plans to impose 25% tariffs on automobiles, pharmaceuticals, and semiconductor imports, accusing other major economies of engaging in unfair trade practices. The proposed auto tariffs could come into effect as soon as April, while the tariffs on drugs and chips will be delayed to give companies enough time to adjust by setting up U.S. operations. These tariff threats are part of Trump’s broader strategy to leverage import duties to further U.S. economic interests. He emphasized that the new tariffs would be reciprocal, targeting trading partners who impose tariffs on the U.S.

Despite the strong rhetoric, markets reacted more calmly to Trump’s latest tariff threats, which suggested that investors were becoming more accustomed to the possibility of escalating trade tensions. In Asia, stock markets experienced small losses, but U.S. stock index futures showed modest gains on Wednesday, indicating that investors may no longer be as fearful of trade-related risks. Trump’s decision to delay tariffs on Canada and Mexico also fueled the idea that he may be using tariffs more as a negotiation tool, rather than applying them indiscriminately.

Market is awaiting further guidance on interest rates, with the Federal Reserve’s meeting minutes from January expected to provide more insight later on Wednesday. During its last meeting, the Fed kept interest rates unchanged and signaled that rate cuts would occur at a much slower pace in 2025, given concerns over persistent inflation and ongoing economic uncertainty. Several Federal Reserve officials are scheduled to speak later this week, and markets anticipate that their messages will align with the Fed’s current stance: no imminent rate cuts.