Gold: The ultimate Trump hedge

The Chinese markets opened for the first time after a long Lunar New Year holiday, and they opened down on a set of weaker-than-expected PMI figures, on the news of 10% tariff on its exports toward Trump’s USA, and a further escalation of the trade war with the tit-for-tat measures announced yesterday from Beijing, including 15% tariffs on US coal and LNG imports and an antitrust probe into Google. But losses in the CSI 300 index remained measured, as the 10% tariffs from the US were considered as being quite modest – compared to the chatter of up to 60% tariffs, and China’s response to the US was also seen moderated. Many simply pointed out that 10% tariff could be absorbed by yuan devaluation and that Google is banned in China since 2010 for not censoring search results in accordance with Chinese government regulations.

Across the Pacific Ocean, Google hit a record high yesterday regardless of the Chinese threat. Magnificent 7 saw dip buying and rebounded near 1.80%. Palantir was the star of the day with a 24% rally in its share price after announcing lot better-than-expected quarterly results and amassing rating and PT upgrades from big banks on its capacity to cash in on the AI boom. In Europe, German Infineon also jumped 10% on better-than-expected revenue forecast from the company due to favourable currency effects and recovery from car industry.

Overall, the Stoxx 600 was also better bid on Tuesday on rising confidence that the EU could negotiate trade terms with Trump and avoid tariffs. Plus, the French PM Bayrou is expected to survive a no-confidence vote today and adopt a budget plan. Such outcome would further narrow the German, French yield spread and encourage a recovery in euro’s valuation, though the upside is seen limited by the European Central Bank (ECB) doves.

In the US, the S&P500 and Nasdaq 100 consolidated gains above the 50-DMA level on relief that Trump’s tariff tantrum quickly fizzled out, and also on the back of lower-than-expected job openings in the US that hinted that – after big increases in the recent months - the trend is back to softening. Softer job openings data hints at softer pressure for higher wages and potentially more supportive Federal Reserve (Fed) policy. As such, the US yields eased and the dollar softened yesterday. The EURUSD regained the 1.03 mark and Cable approached the 1.25 psychological resistance. Traders will focus on the US ADP report and ISM data today. A set of softer-than-expected figures could further pull the US dollar lower.

On the equities front, sentiment is much less cheery this morning as Google and AMD results – released after the bell – didn’t enchant investors. Google announced better-than-expected earnings per share but a slight miss on the revenue growth. More importantly, growth in Google Cloud was *just* 30% (lower than the 32% expected by analysts) and slowing. The combination of slowing cloud revenue and massive AI investment – which will reach reportedly $75bn at Google this year (!) – raises a few eyebrows among investors. By few eyebrows, I mean a 7% drop in the afterhours trading as reaction to the latest results.

AMD, on the other hand, posted better-than-expected earnings and revenue in Q4, its data center revenue nearly doubled last year but fell short of analyst expectations, leading to a nearly 9% drop in AMD’s stock price in the AH trading.

Discontent with Google and AMD results is weighing on US futures this morning, along with Trump risks and worries.

Note that, investors may look more relaxed now than they did at the start of the week, but havens continue to see increased demand on the back of growing global uncertainties under Trump’s hectic lead and with the prospects that the first weeks under Trump is just a foretaste of what’s to come in the next four years. And there is not a better hedge than gold for protecting a portfolio from Trump worries: the more chaotic international relations become, the greater the demand—especially from central banks looking to reduce US exposure should Trump turn his focus on them. As a result, gold hit a record high for the fourth straight session, reaching $2,860 per ounce in Asia for the first time ever. At this pace, Trump makes $3,000 look like an easy target…

In energy, US crude tipped a toe below the $71pb level on de-escalating tensions with Mexico and Canada, but recovered some of the losses on Trump’s renewed pressure on Iran. While the geopolitical risks remain tilted to the upside, Trump’s trade policies are looking bad for global growth prospects and the latter should keep the medium-term upside potential limited. Top sellers are expected to join in between $73/75pb range to make a fresh attempt on the $70pb psychological support in the foreseeable future.