As gold hit 6-year high last week after major central banks all around the world including Fed turned dovish and signalled expansionary monetary policies due to worries on global economic growth, yellow metal again rose above $1,400 on Monday while dollar continued to weaken further. Expected meeting between US President and Chinese leader Xi Jinping at G20 summit this week will be under spotlight however US Commerce Department blacklisting 5 more Chinese tech organizations last Friday will likely undermine any possible positive outcome from the meeting. In the meantime, as geopolitical tension between the US and Iran is on the rise, President Trump said he would impose new sanctions on Iran but stated he would like to have a deal that would help boosting Iran’s economy.
As gold prices began to rise after Federal Reserve kept the rates on hold and signalled a rate cut which will likely take place as early as next month, yellow metal increased again above $1,400 an ounce on Monday by finding support from central banks turning dovish and worries over global economy alongside with geopolitical tensions between the US and Iran.
As of 15:32 GMT+3, spot gold was trading at $1,406.52 an ounce while dollar index was down to 96.02. US 10-year Treasury yield decreased to 2.030.
BlackRock Global Allocation Fund portfolio manager Russ Koesterich said on Bloomberg that gold would rise if Fed’s monetary policy was to weaken dollar while adding yellow metal would be supported further if monetary policy was to be more expansionary than expected due to trade tensions between the US and China.
US President Donald Trump and China’s President Xi Jinping will be meeting at G20 summit in Japan this week. While there is hope for a positive outcome of this meeting, US Commerce Department announced that it blacklisted 5 Chinese tech organizations last Friday and said these organisations were threats to national security and US interests. However it is likely that this move will likely hurt a possible positive outcome from the meeting between two leaders.
Dechert LLP partner Amanda DeBusk said this was done to ramp up pressure on China ahead of the meeting but this would undermine a possible trade deal since China would not like to be seen making concessions to the US. Eurasia Group political risk analyst Michael Hirson said this move would not disrupt Trump-Xi meeting however China would see this as an evidence that US did not want China’s rise as a tech power.
In the meantime, as dispute between the US and China persists after Iran shot down a US drone last week, President Trump announced that he would impose new sanctions on Iran. Trump said sanctions would take place as of Monday but also stated that he wanted to calm down tensions with Iran and reach a deal that would boost declining Iranian economy. Trump also said he did not want a war while US Secretary of State Mike Pompeo stated Washington was ready to start negotiations without any preconditions.