On Thursday, May 29, Japanese Prime Minister Shigeru Ishiba once again called U.S. President Trump for a 25-minute conversation focused on U.S.-Japan tariff issues. This marks the second direct exchange between the two leaders in less than a week, highlighting the intense efforts to advance a trade agreement ahead of the G7 summit. This frequent interaction has refocused financial markets on the uncertainties caused by tariff policies, with gold gaining support driven by safe-haven demand.
1. Intensive Japan-U.S. Calls Accelerate Trade Talks
Following the call, Ishiba stated that the dialogue further deepened mutual understanding, with both sides willing to strive towards reaching an agreement before the G7 summit. He also did not rule out traveling to the United States to clear obstacles for a bilateral agreement. Notably, last week, Trump unexpectedly changed his stance to support Nippon Steel's acquisition of a U.S. steel company, a move seen as extending goodwill from the White House which might ease tariff pressures on Japan.
However, the current negotiations still face challenges. Japan’s Minister for Economic Revitalization, Ryoji Akazawa, has already set out for Washington to prepare for a new round of face-to-face talks with the U.S. Analysts believe that despite the U.S. International Trade Court recently ruling Trump's tariff policy unlawful, the White House is actively seeking legal avenues to appeal while pushing forward bilateral negotiations to find a political foothold for tariff policies.
2. Tariff Risks Persist, Boosting Gold's Safe-Haven Attraction
Although Ishiba emphasized that Japan and the U.S. will establish a win-win cooperative relationship based on the "investment-first" principle, the market is generally concerned that Trump may once again use "reciprocal tariffs" to pressure Japan. Should negotiations fall apart, the U.S. might raise tariffs on Japan from 10% to 24% by early July, significantly impacting key industries such as automobiles, steel, and aluminum. Japan is already in a technical recession, and further export hits could have spillover effects on the global manufacturing chain.
This high level of uncertainty is escalating risk aversion, making gold a safe harbor for funds. Recently, gold prices have been fluctuating around the high level of $3,300 per ounce, reflecting investors' ongoing focus on policy and geopolitical risks.
3. Dollar Weakness Resonates with Global Policy Maneuvers
In addition to Japan-U.S. interactions, the trajectory of global central bank policies is also supporting gold prices. The People's Bank of China is continuously cutting rates, while Europe and countries like New Zealand are signaling monetary easing. Meanwhile, the U.S. Federal Reserve is caught in a policy deadlock due to conflicting inflation and growth pressures, with the probability of a rate cut in September now at 84%. Recent weakening of the dollar index further enhances gold's appeal.
Simultaneously, Japan’s cautious attitude towards U.S. tariff policy illustrates that despite Trump's domestic policy facing judicial restraints, he is still attempting to maintain tariff leverage through negotiation tactics, creating continuous disturbances in global financial markets.
Conclusion:
The frequent Japan-U.S. calls and tariff negotiations have reignited global market concerns over the recurring risks of a trade war. Amidst the U.S. Federal Reserve's interest rate policy dilemmas, Trump's trade pressure tactics and the responses from various countries are intertwining into a storm of uncertainty. Gold, as a safe-haven asset, has re-entered the spotlight for investors, with future price trends likely driven by policy-related news. The market will focus on the progress of the upcoming talks between Ryoji Akazawa and U.S. Treasury Secretary Besant, as well as whether Japan and the U.S. can reach a substantive agreement before the mid-June G7 summit. The gold market stands at the crossroads of policy and expectations, and should risk aversion escalate further, gold prices might challenge previous highs.
