As US President Donald Trump follows through his statement and increases tariffs on Chinese goods worth $200 billions to 25% from 10%, gold is set for weekly gain despite lack of upside momentum. Two-day trade talks which started yesterday will resume today however it was stated that there was no significant progress so far. China’s Vice Premier Liu He said on Friday that increasing tariffs would not solve problems while adding he hoped to find a common ground to solve the problems. In the meantime, exports increased in Germany while industrial production decreased in France and Italy in March, according to data released today. In the UK, economy grew above expectations in the first quarter as manufacturing and industrial output rose in March. In the US, consumer price index was below expectations in April.
Gold is set for weekly gain on Friday amid trade tensions between the US and China as US President Donald Trump’s instruction to increase tariffs on Chinese imports worth $200 billion to 25% from 10% took effect as of 12:01 EDT today.
As of 16:14 GMT+3, spot gold was trading at $1,286.49 an ounce while dollar index was down to 97.21. US 10-year Treasury yield edged down to 2.453.
Two-day trade talks between the US and China will resume today however it was stated that it is unlikely to see a positive outcome. China’s Vice Premier Liu He said on Friday that tariff increase would not solve the problem and hurt both China and the US as well as the whole world while adding he hoped to find a common ground to find a solution to the problems. Chinese Commerce Ministry earlier stated China would take necessary measures if the US increased tariffs on Chinese goods however they did not mention what those measures would be.
Australia National Bank economist John Sharma said on Reuters that there was still uncertainty over trade talks between two countries while adding the possibilities were already priced in and there needed to be more weakness in global equities for gold prices to rise sustainably.
NatAlliance Securities’ Andrew Brenner said there would be still time around 3-4 weeks for tariff increases to take place since tariffs did not affect goods in transit, so there could be still chance of reversal. However, President Trump said on Twitter today that there was no need for rush in trade talks.
While trade tensions between two countries increased concerns over the world economy, exports increased by 1.5% in Germany, Eurozone’s biggest economy which has been harmed badly by trade wars, while imports rose by 0.4% in March. Exports was down by 1.2% and imports decreased by 1.6% in previous month. On the other hand, industrial production was down by 0.9% both in France and Italy on monthly basis in March while retail sales decreased by 0.3% monthly and 3.3% annually in Italy.
In the UK, industrial and manufacturing output was above expectations in March. Industrial output increased by 0.7% monthly and 1.3% annually while manufacturing output rose by 0.9% monthly and 2.6% annually. According to initial estimates, UK economy showed better than expected performance in the first quarter and grew by 0.5% quarterly and 1.8% annually.
It was stated that this strong performance was due to increasing consumer spending and manufacturing activity as companies brought activity and orders forward early this year taking into account risks that the UK would leave the EU on March 29, possibly with no-deal.
In the US, consumer inflation was down to 0.3% from 0.4% on monthly basis in April while annual inflation was up to 2% from 1.9%. On the other hand, core consumer inflation, which is closely watched by Federal Reserve in deciding its monetary policy, was steady at 0.1% monthly while annual inflation increased to 2.1% from 2%.