Geopolitical Tensions and a Weaker Dollar Drive Gold Nearly 3% Higher

Market Overview

Gold prices surged on Monday, climbing nearly 3% as geopolitical risks and broad U.S. dollar weakness fueled safe-haven demand. During early Asian trading hours on Tuesday (May 6), spot gold remained steady near a one-week high, hovering around $3,345 per ounce. The market‘s attention now turns to this week’s Federal Reserve policy meeting.

Meanwhile, the ISM Services PMI unexpectedly rebounded, narrowing losses in U.S. equities and the dollar index. The Dow briefly turned positive, and 10-year Treasury yields hit a one-week high. Crude oil, however, faced sharp losses, with WTI plunging over 5% intraday before paring back. The drop followed an unexpected move by OPEC+ to accelerate production, sending oil to its lowest level in three years.

Hot Topics to Watch

● Asian Currencies Rally Across the Board

In early May, Asian currencies staged a rare, broad-based surge—most notably the New Taiwan dollar, which jumped 6.5% in just two sessions, shaking markets. Analysts attribute the dollar's decline not to coordinated global intervention, but to fundamental shifts: downward revisions to U.S. growth forecasts, fears of stagflation amid trade tensions, questions over Fed independence, rising term premiums, and lowered terminal rate expectations.

Adding to the dollar‘s weakness is Germany’s shift toward fiscal expansion, boosting the appeal of European assets. Another structural driver: years of accumulated trade surpluses in Asia are now unwinding, with dollar assets being repatriated—adding significant FX hedging pressure and supporting local currencies.

● Oil Market Faces Growing Oversupply Concerns

OPEC+ surprised markets by announcing an aggressive ramp-up in oil output, triggering a sharp selloff in oil futures. Wall Street banks have since lowered their price targets: Goldman Sachs cut its Brent crude forecasts for this year and next by $2–$3 per barrel, while Morgan Stanley reduced its quarterly estimates by $5 per barrel. The firm expects oversupply to intensify, projecting a daily surplus of 1.1 million barrels in the second half of 2025.

Key Data to Watch

• 20:30 GMT+8 – U.S. March Trade Balance (USD bn)

• 22:00 GMT+8 – U.S. April Global Supply Chain Pressure Index

Overnight Developments

• 00:00 GMT+8 – EIA releases its Short-Term Energy Outlook

• 01:00 GMT+8 – U.S. 10-Year Treasury Auction: Yield & Bid-to-Cover Ratio