After increasing up to the highest level since 2013 on Wednesday due to the data showing that US manufacturing contracted for the first time since 2013 in August, gold prices declined due to resolved uncertainties on US-China trade front alongside with unrest in Hong Kong, Brexit issue in the UK and political crisis in Italy. China Commerce Ministry said on Thursday that high-level trade talks will be held in October. In Hong Kong, where there has been protests for a long time now, the government withdrew extradition bill that caused the protests in the first place. In the UK, the bill to stop no-deal Brexit passed the parliament and government failed to get majority in the vote for a snap election. In Italy, Prime Minister Conte announced his cabinet and ministers are expected to start working today.
Gold prices increased to $1,557 an ounce on Wednesday following weak US manufacturing data which indicated the first contraction in the sector since April 2013 in August but then yellow metal pulled back on Thursday as global uncertainties considerably resolved.
As of 14:15 GMT+3, spot gold was trading at $1,542.53 an ounce while dollar index was down to 98.18. US 10-year Treasury yield recovered slightly and was up to 1.515.
OANDA analyst Jeffrey Halley said on Reuters that gold would be pressured by developments on trade front while adding focus could turn to growth-driven issues.
Uncertainty regarding when next trade talks would take place following tit-for-tat tariffs by the US and China resolved after Chinese Commerce Ministry said on Thursday that middle-level talks would start in Mid-September while high-level talks between trade representatives would take place in October. US Trade Representative’s Office confirmed the statement and said China’s Vice Premier Liu He would visit US Trade Representative Robert Lighthizer in the coming weeks.
In Hong Kong, where there has been protests since June, the government announced withdrawal of extradition bill that caused the protests in the first place. The bill would make it possible for Hong Kong citizens who are claimed to commit a crime against Chinese government to be sent to China for a trial. Despite the withdrawal, protestors insist on their remaining four demands to be met as well: retraction of the word “riot” to describe the protests, release of protestors, independent judgement for police brutality and right for Hong Kong citizens to choose their own leaders.
In the UK, the bill to prevent no-deal Brexit passed the parliament. According to the bill, if Brexit deal was not approved by the parliament until October 19, British government will need to ask the EU for another Brexit delay and again, new Brexit date will need to be approved by the parliament as well. In another vote, the government failed in its call for a snap elections on October 15 as there was no maintained majority.
In Italy, political crisis resolved as Prime Minister Giuseppe Conte announced its new cabinet. With ministers from both parties, new coalition is expected to improve Italy’s ties with the EU and much softer approach to issues related to immigrants.