Gold Up Amid Tariff Uncertainty After US Supreme Court Ruling

Markets rose after the US Supreme Court struck down Trump's global tariffs, but a quick pivot to other legislation imposing new tariffs, along with uncertainty about trade deals, left markets more uncertain.

The Latest Developments

• Markets react positively to the US Supreme Court ruling on tariffs.
• A 6-3 decision found that Trump overstepped his authority under IEEPA for the "liberation day" tariffs, ending the taxes with immediate effect.
• Trump announced new tariffs under a different legal framework of up to 15%.
• Focus on China, amid a fragile trade truce in the ongoing trade war, as traders gauge reaction to the new tariff paradigm.

Meet the New Tariffs, Same As The Old Tariffs

On Friday, the US Supreme Court struck down broad tariffs imposed by the Trump Administration last April under IEEPA, including those on Canada, Mexico and China. The court ruled 6-3 that US President Donald Trump had overstepped his power under the International Emergency Economic Powers Act (IEEPA), immediately ending the "Liberation Day" tariffs. The government had collected around $130 billion through the programme so far, which would have to be refunded. The decision came out during trading hours, with the initial market reaction including a rise in stocks on both sides of the Atlantic, even though the result was as expected. Traders hoped for greater clarity and stability in trade policy, at least in the short term. Analysts suggested that even if new tariffs are implemented, they would be based on stronger legal grounds, making them less likely to be overturned by judicial review, which could also reduce some of the uncertainty.

Also, as widely expected, the White House pivoted to other legislation not covered by the Supreme Court ruling and imposed 10% global tariffs, which were raised hours later to 15%. Analysts agree that Trump is likely to continue pursuing tariffs, which could lead to a new round of uncertainty, as the trade deals announced last year may no longer apply. India paused trade negotiations following the Supreme Court's decision. The EU has yet to ratify the deal announced a few months ago, and the ruling could complicate its passage through Parliament, which is already facing challenges over the Greenland debacle. The first test of the new trade rules might come from China, as some analysts suggest it is the largest beneficiary of the Supreme Court's ruling, as it means US tariffs – and negotiation leverage – are reduced. However, analysts suggest that both Washington and Beijing are hesitant to alter the fragile trade truce and that Trump has other ways to impose tariffs.

Market Reaction and Next Steps

Trump has already moved to reintroduce tariffs under a different law, known as "Section 122", which allows the President to enact levies for 150 days until a trade study is conducted. The application of "global" 15% taxes raised questions amid countries like the UK, Australia, and Chile, which had reached deals for tariffs of just 10%. The coming days could see further market reactions as the new tariff regime is sorted out. After the market had the weekend to react to the situation, risk-off pressures seemed to be reasserting themselves, with US stock futures trading down and gold over $5,150 per oz on early Monday. Foreign officials have not called for reviewing any of the trade deals secured last year, with the EU calling for the US to honour its trade deal commitments.

Gold Leaves Behind Triangle Pattern

Gold’s move past $5,120 might have left behind an ascending triangle pattern, calling for a 13% upside if the measured-move projection played out from the breakout point. Resistance levels ahead of $5,820 sit at the round $5,250 and $5,500, as well as the prior record high of $5,630, followed by $5,750. On the flip side, if RSI momentum rotates and support breaks, prices could revert to the $5k handle, exposing $4,850.

Source: SpreadEx | Gold, 4-hour Chart