While trade tensions increase between the US and China due to Beijing reneging on prior commitments and US President Donald Trump’s threats to increase tariffs, gold prices steady on Thursday. While it is a matter of concern whether China will be able to convince the US not to increase tariffs in trade talks starting later today, safe haven demand rises. On the other hand, Chinese Ministry of Commerce said on Wednesday that they would take necessary measures if the US increased tariffs while US President Donald Trump said China broke the deal. In the meantime, Chinese inflation increased to 6-month high on April, according to data released today.
While risk sentiment fades and safe haven appeal increases due to rising trade tensions following US Donald Trump’s statement to increase tariffs on Chinese goods, gold prices steady on Thursday ahead of trade talks starting later in the day.
As of 15:21 GMT+3, spot gold was trading at $1,281.45 an ounce while dollar index was steady at 97.63. US 10-year Treasury yield was down to 2.444.
Daily FX analyst David Song said on Reuters that there was no rally in gold prices since there was no panic despite risk-averse market.
On Wednesday, the US formally stated that tariffs on Chinese imports worth $200 billion would increase to 25% from 10% on Friday in a notice on Federal Register, US federal government’s official journal.
While it is a matter of concern whether Chinese officials will be able to change President Trump’s mind not to increase tariffs, Trump said on Wednesday that China broke the deal and added “we won’t back down until China stops cheating our workers and stealing our jobs.” Trump stated earlier on Sunday that China was trying to run out the clock on his administration and hoping to negotiate with Democrats while adding that was not going to happen as he announced he would impose 25% tariffs to remaining Chinese imports worth $325 billion beside increasing current tariffs to 25% as well. US Trade Representative Robert Lighthizer also said earlier that China reneged on its earlier commitments while they thought talks were showing progress.
In response, Chinese Ministry of Commerce said on Wednesday that escalation in trade dispute would not be in favor of two countries’ people and the world while adding they would take necessary measures if the US increased tariffs on Friday.
In the meantime, consumer inflation reached 6-month high at 2.5% in April while producer prices increased by 0.9%, according to data released in China today. While inflation is closely watched to see whether demand and economic activity revives in the world’s second largest economy, it was stated that the increase in inflation was due to China’s economic stimulus and would likely weaken in upcoming months due to economic slowdown.