After staying in rangebound whole week with profit taking, gold prices jumped on Friday as trade tensions between the US and China increased again. China State Council stated today that it would retaliate US tariffs and impose additional tariffs on US goods worth $75 billion. Following this, US President Donald Trump ordered US companies to stop their operations in China and find alternatives while adding they were better off without China. In the meantime, following Fed minutes which was in line with expectations, Fed Chair Jerome Powell said today that Fed had been watching developments and would act as appropriate to sustain economic growth.
Gold prices increased sharply on Friday as trade tensions escalated between the US and China after rather a quiet week with not much movements in prices.
As of 21:07 GMT+3, spot gold was trading at $1,527.59 an ounce while dollar index was down to 97.71. US 10-year was also down to 1.517.
China State Council announced today that it would impose tariffs ranging from 5% to 10% on US goods. Tariffs would take effect in two batches in September 1 and December 15 while China would also resume imposing 25% tariff on US cars and 5% tariff on car parts and components. The council stated China was forced to take countermeasures against the US while adding it hoped US would follow Osaka consensus and get back on track to work in cooperation with China to find common ground regarding differences.
Following this, US President Donald Trump ordered US companies to stop their operations in China urgently and find alternatives. Trump also said he would make more comprehensive statement later on Friday but it is stated that US presidents could not legally go for such a call to companies.
In the meantime, Fed Chair Jerome Powell, who has been under pressure by President Trump to cut the rates, gave a speech in Jackson Hole today and said the Fed had been watching economic and geopolitical risks closely while stating US economy continued to perform well since strong labor market and wage growth supported moderate growth despite weakening business investments and manufacturing. Powell also said if trade war was to contribute deteriorating global growth by weakening business investments and confidence, the central bank could not make it all right by monetary policy. Powell added the Fed had been closely watching short-term turbulences and focusing on US economic performance with risks such as no-deal Brexit, tensions in Hong Kong, slowing German economy and problems offshore.