Trade Negotiations Come Down to the Wire

After extending the trade war truce with China, the deadline of the 90-day moratorium on tariffs looms, with only one agreement in principle being reached, prompting unilateral action.

Extension or Unilateral Action

in London were the focus last week. Yet, both sides confirmed they reached a deal not to end the trade war but to simply extend a truce that would still apply 55% tariffs on Chinese goods entering the US and 10% tariffs on US goods entering China. However, the main point of contention was not the tariff levels. It was China withholding the export of certain rare earth materials that are vital for car manufacturers, as well as the supply of batteries. On this point, the deal was even more vague. The issue around US curbs on AI chips to China and the needed for advanced US military systems was also left unresolved.

Following more than two months after "Liberation Day", tariffs were imposed and then suspended again for 90 days. In fact, only one framework deal has been reached, between the United States and the United Kingdom, with progress in that the country has decided a second round is not needed. Investors are understandably getting nervous about what happens when the deadline of 9 July comes around. US President Donald Trump says he is willing to make an but also insists that it won't be necessary. What that exactly means is subject to interpretation, as Trump said at the same time that he would be sending "letters" that would unilaterally set tariffs.

Deal Chances and Market Chances

that countries engaged in negotiations, including blocs like the EU, could see an extension in the trading period. Both Trump and Bessent have talked about ongoing negotiations with 15-18 countries. The rest would be subject to the unilateral application of tariffs, and it's unclear whether tariff rates would be any different from the ones imposed back at the beginning of April that caused so much market consternation.

With the ongoing conflict between Israel and Iran on top of trade uncertainty, gold (and other safe havens) has a moment to shine. as the growing uncertainty in the market could give it a further push. Meanwhile, the dollar could continue to weaken, as around the same time (July 4) is the date the White House expects the budget for this year to pass, which would raise the debt ceiling once again. Notably, the government is expected to run out of borrowing capacity in August if the budget isn't passed.

Gold Retests Triangle Breakout Zone?

Gold spot prices have formed a double top near $3450 per ounce, with short-term price action and an RSI rejection suggesting a potential break below the lower 20-period VWAP level near $3415 at the time of writing. The ‘autotrend’ tool reveals that the next support levels sit at $3378 and $3359, bringing the focus to the apex area of a potentially complete triangle pattern. A breakdown could see prices decline towards $3300, while a bounce could see the resistance turn to support, boosting prices past the VWAP high at $3448 and eventually exposing the market peak at $3500.

Source: SpreadEx / Gold SPOT

Key Takeaways

The trade negotiations between the US and various countries, including China, have reached a critical juncture as the 90-day moratorium on tariffs is set to expire on 9 July. While a framework deal has been reached with the UK, and progress has been made with Indonesia, talks with other nations remain unresolved, particularly regarding issues such as rare earth materials, AI chips, and key minerals. With the deadline looming, Trump has indicated a willingness to extend the truce for countries negotiating in "good faith" but has also threatened unilateral action through "letters". However, Bessent has also suggested that negotiations could see an extension. Amidst trade uncertainty and the ongoing conflict between Israel and Iran, gold prices have surged and could further increase due to the weakening of the US dollar as the US government approaches its borrowing limit in August if the budget is not passed by 4 July.