Gold & Oil Climb on Tariffs, Ukraine Escalation

Gold (XAU), silver (XAG) and oil (WTI) all rose on Monday, 1 September. Gold reached a new record high on the back of increased tariff uncertainty after an appeals court ruled some of US President Donald Trump’s tariffs illegal on Friday. Silver punched through the $40 per ounce level to a 14-year high as expectations of an interest rate cut increase. And oil prices got a boost following Ukrainian strikes on Russian oil refineries just ahead of a critical OPEC+ meeting over the weekend.

Meanwhile, across the Atlantic, some defence stocks in Europe spiked higher amid reports that Europe plans to deploy military forces in Ukraine in a post-war era. Uncertainty also emanated from France, as the country’s PM faces a vote of confidence, with the French-German spread, a risk measure,  near record highs. 

As gold's record run continued in early Tuesday trading, investors will be watching for any signals affecting the Federal Reserve’s next interest rate decision during its 17 September FOMC meeting.

TL;DR

• Gold hit a new record high due to tariff uncertainty, with Silver surging to a 14-year high.

• Oil prices rose after Ukrainian strikes on Russian refineries, as Europe plans post-war deployment to Ukraine.

• Investors await Fed signals and jobs data for clues on a potential rate cut.

• Markets expect a possible jumbo Fed rate cut if jobs data is weak.

What Drove Gold to a New Record High This Week?

Gold has been trading higher in 2025 due to uncertainty surrounding tariffs and geopolitical tensions, as well as recent concerns about Fed independence and the increasing likelihood of the Fed cutting interest rates. However, the push to record highs is attributed to the appeals court ruling last Friday, which found that a large portion of Trump’s tariffs were illegal, with those on steel and aluminium (ALI) unaffected. 

The court said Trump’s “Liberation Day” levies invoked through the 1977 International Emergency Economic Powers Act (IEEPA) reside with Congress and that Trump’s imposition of tariffs was illegal. Specifically, the court of appeals ruled that “reciprocal” tariffs, such as the 10% baseline duty on most countries, as well as those on China, Canada, and Mexico, were illegal, potentially reducing US-affected goods imports to just 16% from 69%. The court decided to allow tariffs to be in effect until 14 October.

While shelving this decision till next month, investors await a court ruling on whether Trump’s removal of Fed Governor Lisa Cook is legitimate. Her removal could be followed by a more dovish appointment, which would weaken the dollar and, in return, support the precious metal. 

However, gold prices may be at risk from a potential ceasefire meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy. With a summit still unconfirmed, the conflict intensified.

Ukraine Strikes on Russian Oil Facilities Boost Oil

Oil prices rose on Tuesday, with Brent (EB) and WTI up 0.54% and 1.58% by 06:17 GMT, following Ukrainian drone attacks on Russian oil assets, which account for around 20% of the country’s processing capacity. The rise in geopolitical tensions comes as Putin met with Chinese and Indian leaders at the Monday Shanghai Cooperation Organisation (SCO) summit. China called for “a new global order” as Trump’s tariffs push other countries towards the global south. However, it also follows recent tariffs on China and India, aiming to reduce Russian oil imports. Investors will eye the OPEC+ meeting for further clues on supply-demand dynamics and whether the organisation will hike production or not. 

Meanwhile, the rhetoric surrounding the Ukraine situation from Europe intensified after European Commission President Ursula von der Leyen said in an interview that she has a “pretty precise” plan to deploy troops in Ukraine as part of security guarantees following a peace deal agreement, which the Kremlin had previously rejected.  At the SCO meeting, Putin said he reached an “understanding” with Trump at the Alaska summit, but he blamed the West for the invasion. European leaders are expected to meet on Thursday to discuss next steps.

Still, the focus remains on the upcoming Non-Farm payrolls (NFP) due on Friday.

Can This Week’s Jobs Data Trigger Another Fed Rate Cut?

Despite gold climbing to record highs, markets are awaiting this week’s NFP numbers for clues on whether the Fed’s September cut will be dovish or not. Currently priced in with a 90% probability, investors are not ruling out a jumbo rate cut, where the Fed cuts 50 basis points if the jobs data disappoints. 

The record run in gold prices has likely been supported by an increasingly weaker labour market, with macroeconomic and geopolitical uncertainty expected to push prices higher, according to UBS (UBSG.VX). Goldman Sachs (GS) projected a $4000 per ounce price by the middle of next year, assuming a more dovish board and less Fed dependence. (Source: Oilprice.com)

*Past performance does not indicate future results. The above are only projections and should not be taken as investment advice.