While global markets plunge due to US increasing tariffs on Chinese imports worth $200 billion last week followed by Chinese retaliation on Monday, gold holds firm close to one month high by finding support from increasing safe haven demand. China Ministry of Finance announced on Monday that China would increase a range of tariffs to American products worth $60 billion as of June 1. US Office of Trade Representative announced yesterday that official process started on the plan to impose tariffs on Chinese goods which had not been subject to tariffs so far. In the meantime, Boston Fed President Eric Rosengren said on Reuters that Fed had appropriate tools including rate cut to use in case of trade dispute causing further slowdown in the US economy.
Gold prices found support from safe haven demand by investors fleeing from risky assets and held firm close to one-month high on Tuesday, while rising trade tensions between the US and China due to mutual tariff increases led to rising concerns over global economic slowdown.
As of 15:42 GMT+3, spot gold was trading at $1,299.10 an ounce while dollar index was up to 97.45. US 10-year Treasury yield edged down to 2.403.
China announced its plan to increase tariffs ranging from 5% to 25% on American products worth $60 billion yesterday from June 1 after US increased tariffs on Chinese products worth $200 billion from 10% to 25% last Friday.
US President Donald Trump said on Monday that it would hurt China unless there was a trade deal because companies would leave China and import from other countries while underlining China stepped back from an almost done deal. In response to that, Chinese Foreign Ministry said China would “never surrender to external pressure.”
US plan to increase tariffs on Chinese products worth $300 billion which had not been affected by previous tariffs was announced yesterday. US Office of Trade Representative said official process started to impose 25% tariffs on wide range of products, mostly consumer products, from milk to aluminium as well as steel and electronics and further details would be announced on June 17.
President Trump said this was an official procedure before actually imposing tariffs while adding he had not decided whether to impose further tariffs yet. Trump also said he would meet Chinese leader Xi Jinping in June 28-29 when G20 summit will take place in Japan while stating whether a deal could be reached with China would likely be known in the next 3 or 4 weeks. It is a matter of concern now that trade tensions might increase further since tariffs will not be imposed before the end of June when G20 summit will take place in Japan.
In the meantime, Boston Fed President Eric Rosengren said on Reuters that Fed had appropriate tools including rate cut to use in case of rising trade tensions between the US and China causing further slowdown in the US economy. Rosengren said Fed would keep its patient stance until they had enough sense of whether this would have long-lasting effects while underlining there would likely no need for a rate cut.