While trade talks started on Thursday made a positive impact on global equities, gold is set for its first weekly loss in this month with increasing risk sentiment. As trade talks between the U.S. and China to end tit-for-tat tariffs will continue today, White House economic adviser Larry Kudlow said some tariffs will be kept in place as a leverage to check whether China complies with a possible trade deal, giving a signal that some tariffs will likely be lifted. In the meantime, while Federal Reserve officials keep giving cautious messages to the markets, Fed Vice Chair Richard Clarida said economic shocks abroad can affect not only the U.S. real economy but also the financial sector even more while stating that Fed cannot ignore the U.S. economy being exposed to external risks.
While global markets responded positively to trade talks between the U.S. and China, gold prices were pressured by increasing risk sentiment as well as rising dollar index and was on its way to its first weekly loss in one month.
As of 15:45 GMT+3, spot gold was trading at $1,297.48 an ounce while dollar index was at 97.07. U.S. 10-year Treasury yield inched up to 2.421, although it was still showing weakness.
Trade talks which started on Thursday to end long standing trade war will continue on Friday. The U.S. representatives stated that they had a very productive dinner on Thursday while negotiations are expected to deepen today on significant issues such as intellectual property rights, technology transfer, trade barriers and access to Chinese market.
While officials from two sides are cautious on making comments about trade talks, White House economic adviser Larry Kudlow said on Thursday that they would like to keep their tariff leverage to check whether China complies with a possible trade deal and added, “however, that doesn’t necessarily mean all the tariffs will be kept in place.” Kudlow also said it was possible for talks to continue for weeks or months and underlined that important point was to reach the best deal serving the U.S. interests.
The U.S. side requests China to end its practices to systematically steal the U.S. intellectual property rights and measures to force the U.S. companies to transfer their technology to Chinese companies, while China demands lifting current tariffs completely. According to Reuters’s sources, China made “unprecedented proposals” on these critical disagreements.
In the meantime, while Fed officials keep making cautious speeches on monetary policy, Fed Vice Chair Richard Clarida said on Thursday that the U.S. was currently more exposed to the risks abroad due to its deep trade and financial connections with other parts of the world as he added Fed could not ignore this. Clarida said, external shocks could affect both the real economy and financial sector in the U.S as he underlined the U.S. assets and debts abroad had raised to 300% of GDP. He also said Fed had already faced two serious external problems in a decade after the global financial crisis, including concerns that Eurozone might break apart in 2011 and the financial turmoil hit Chinese economy in 2015 and 2016 while underlined that Fed was again facing another tough situation currently, with Brexit uncertainty going on in the EU, trade war and slowdown in Chinese economy. Lastly, Clarida drew attention to the global economic and financial developments as he added they could be patient in determining rate hike policy.