Stocks are flying high, while the two precious metals, gold and silver, are seeing a significant sell-off on Monday.
Dow-30 index is up close to 1,000 points, while Nasdaq Composite futures are up by 3.5% on a day when everything seems to be going right for the stock markets.
“A temporary easing of trade tensions between the United States and China announced on Monday will set global financial markets in motion, offering a rare and welcome jolt of optimism after months of uncertainty,” says Nigel Green, CEO, deVere Group.
Meanwhile, gold is down 3% to trade at $3,223.57, and silver trades at $31.9, down by 2.33%.
Four significant factors seem to have shifted investor sentiments. Firstly, the big news for the markets flowed in from the US-China trade deals. The tariff deal between the US and China is seen as a substantial de-escalation in the trade war.
Following news of the US and China’s significant tariff deal, investor sentiments rose and demand for safe-haven assets fell.
Following trade talks in Switzerland over the weekend, the United States stated that it would reduce tariffs on Chinese goods from 145% to 30%, while China will reduce taxes on US imports from 125% to 10%, both for 90 days.
Secondly, market optimism was also bolstered by a ceasefire between India and Pakistan, which remains in place despite persistent charges of violations by both sides.
Thirdly, the Fed’s warning of rising inflation and employment risks last week, together with Chair Powell’s rejection of a preemptive rate cut in reaction to tariff-related uncertainty, put further pressure on the non-yielding metal.
Fourthly, Gold prices are being further pressured by the US dollar’s recovery and return to over 100. US Dollar Index, a measure of the value of the dollar against a basket of six foreign currencies, spiked over 1.4% to trade at 101.76 on Monday.
Lastly, Ukraine’s President Volodymyr Zelenskiy has agreed to meet Kremlin leader Vladimir Putin in Turkey on Thursday. This was after US President Donald Trump’s immediate acceptance of Putin’s proposal for direct talks.
Taken together, these factors appear to be reviving the stock market’s momentum. BSE Sensex is up by 2874 points, which is 3.62% higher than the previous day’s close.
The sell-off in gold prices in India continues. The gold rate today in India is Rs 92,905, lower by 3.76% over the previous day’s closing price of Rs 96,518.
Now, the focus will turn to important inflation data that is due this week. CPI and PPI figures should provide information on how pricing pressures are changing and whether the tariffs’ effects are already showing up in inflation.