As recent escalation in trade tensions between the US and China faded risk sentiment and led investors to safe havens, gold prices continued to increase on Monday and reached above $1,550 an ounce. Following China’s announcement of imposing additional tariffs on US goods last Friday, US President Donald Trump said additional 5% tariff to current and planned tariffs will be imposed which increased worries on how high trade tensions could escalate. In the meantime, worries on global economic outlook persist amid US-China trade dispute while data released today showed German business confidence fell to its lowest in seven years in August. Moreover in the US, durable goods orders increased above expectations in July however weakness in business investments persisted.
Gold prices continued to increase on Monday and reached $1,554 an ounce by finding support from increasing safe haven demand due to worries that trade tensions between the US and China could lead the world economy into a recession. Following US President Donald Trump’s comments on Monday, yellow metal pulled back due to profit taking and recovering risk sentiment however it keeps its upside momentum.
As of 19:05 GMT+3, spot gold was trading at $1,531.66 an ounce while dollar index was at 97.98. US 10-year Treasury yield was weak at 1.525.
Julius Baer analyst Carsten Menke said on Reuters that this was due to increasing trade tensions and risks regarding global economy while adding global recession worries kept supporting gold prices.
China announced last Friday that it would impose additional tariffs ranging from 5% to 10% on US goods worth $75 billion and said these tariffs would take effect in September 1 and December 15. Following that, US President Donald Trump said he would increase current and planned tariffs by 5%. This means, current 25% tariffs on Chinese goods worth 5250 billion would go up to 30% as of October 1 and delayed 10% tariffs on Chinese goods worth $300 billion would go up to 15% as of December 15.
Due to these recent announcements, markets fell today until Trump said Chinese officials contacted Washington and stated their will to come back to negotiation table which recovered risk sentiment slightly and caused profit taking in gold prices however gold is expected to keep its upside momentum. UBS Group analysts said in a report that they kept their long positions in gold and expected gold to increase up to $1,600 an ounce in the following three months.
According to data released today, German Ifo business climate index fell to its seven year low in August from 95.8 to 94.3 as the economy has been hit by US-China trade dispute. As pessimism is at its worst since 2009, this is seen as another indicator of German economy going into a recession.
In the US, durable goods orders increased above expectations in July by 2.1%. However, business investments contracted in the second quarter at its weakest level since 2016 which was mostly due to weakening manufacturing.