While trade tensions increase between the US and China due to US President Donald Trump’s statement to increase tariffs on Chinese imports as of Friday, gold prices keep its momentum upside on Wednesday by finding support from investors’ appetite for safe havens. China is expected to retaliate in case there is no last-minute deal until Friday and tariff increase takes place. Chinese exports declined unexpectedly in April while imports increased, according to data released today. German industrial production, which was expected to decline, increased in March for second month in a row.
Gold prices increased on Wednesday by finding support from investors who fled from risky assets and headed to safe havens due to geopolitical risks caused by increasing trade tensions between the US and China this week.
As of 15:24 GMT+3, spot gold was trading at $1,289.75 while dollar index was down to 97.53 due to investors’ appetite for Japanese yen which is also a safe haven. US 10-year Treasury yield kept its downside momentum and decreased to 2.439.
In a paper published on Chinese People’s Daily newspaper, it was stated that China faced similar threats before and they had full confidence to face all difficulties and challenges as a response to US President Donald Trump’s threat to increase tariffs on Chinese imports worth $200 billion. China’s official news agency Xinhua said China had always been reluctant to fight, regarding US-China trade war and added it was not afraid to fight and would fight if necessary. In case there is no deal until Friday in trade talks expected to start tomorrow, trade war will likely escalate further if China retaliates to tariff increase.
According to data released in China today, exports declined unexpectedly by 2.7% in April. It was stated major impact was due to decreasing exports to the US while demand for high-tech products declined as well because of global economic slowdown. Capital Economics said in a note that exports would be weighed on in case of tariff increase while underlining exports would also be subdued due to global slowdown even if the US and China strike a last-minute trade deal before Friday. On the other hand, imports increased above expectations by 4% in April. With this, it seems domestic demand revived slightly from recent weakness thanks to China’s stimulus.
In the meantime, Germany’s industrial production, which was expected to decline, increased by 0.5% in March, according to Federal Statistics Office. Despite this, Germany Economy Ministry said German industry outlook was expected to remain muted in coming months due to decreasing orders and weak business confidence. EU Commission had stated in its report yesterday that they downgraded Germany’s growth forecasts to 0.5% from 1.1% as German economy had been harmed by slowing global economy, trade war and Brexit uncertainty.