Investors at the Frankfurt Stock Exchange have been largely in the dark for over a week. The DAX is stagnating, unable to break free as neither buyers nor sellers can gain a foothold. Following a wave of stop-loss selling last week, the market experienced a short squeeze, resulting in a movement of 1,000 points down and then back up again, leaving the DAX exactly where it started.
Since the tariff agreement between the U.S. and the European Union, some clarity has emerged, but confusion around its implementation is just beginning to surface. Questions arise about whether tariffs are cumulative—will the 27.5% tariff on cars apply alongside the previously expected 15%? In Japan, there is relief today upon hearing that the various tariffs will not be cumulative. However, it remains unclear whether the same rules apply for Japan and the EU.
The complexities surrounding tariffs highlight the unpredictability in implementation, as evidenced by the recent surge in gold prices. A new record high has been reached, fueled by news that 1-kilogram and 100-ounce gold bars, tagged with tariff classifications, could lose their duty-free import status in the U.S. This represents a sharp departure from the exceptions granted as recently as April.
There is uncertainty regarding whether this is an error on the part of U.S. authorities or if these tariffs will only apply to imports from Switzerland, which has not finalized a deal with the U.S. In any case, many Americans are currently seeking to acquire physical gold bars in anticipation of rising prices due to potential tariffs. This surge in demand is driving up gold prices further.
By Jochen Stanzl, Chief Market Analyst at CMC Markets
