As trade tensions remained high following new tariffs that took effect on Sunday, gold prices increased on Tuesday however upside movement was limited by stronger dollar. Trade talks are expected to continue this month however optimism faded as sides had disagreements on meeting schedule. Moreover, China engaged World Trade Organization stating that new US tariffs were violating consensus reached in Osaka by sides’ leaders. On economic data side, US manufacturing PMI will be under spotlight later today.
Gold prices remained supported by escalating trade tensions due to additional tit-for-tat tariffs imposed by US and China and increased on Tuesday however stronger dollar limited further increase.
As of 13:13 GMT+3, spot gold was trading at $1,532.70 an ounce while dollar index was up to 99.28. US 10-year Treasury yield was down to 1.486.
Phillip Futures analyst Benjamin Lu said on Reuters that alongside with poor risk sentiment, likely chance for further volatility created by trade tensions kept supporting gold prices while adding better than expected US manufacturing data could pressure yellow metal.
As additional tariffs imposed by the US and China took effect on Sunday, sides had disagreement regarding schedule of trade talks expected this month. Ahead of talks, China requested the US to suspend additional tariffs but US declined it. On the other hand, US requests were not accepted by Chinese officials either. Even though there is no schedule yet, it is stated that this doesn’t mean there won’t be trade talks this month.
In the meantime, China engaged World Trade Organization (WTO) regarding latest US tariffs which it claimed were violating consensus reached by sides’ leaders in Osaka. In a written defence on Friday, the US said the reason for new tariffs was China’s unilateral aggressive industrial policy measures and stated it had adopted tariffs to eliminate China’s technology transfer policies that stealed or unfairly adopted technologies from its trade partners. The statement also said China chose to impose tariffs due to maintain its unfair policy measures instead of addressing US concerns regarding its policies. According to WTO rules, tariffs above maximum level should be justified by the organization. Besides, the US will need to respond China’s complaints in 60 days, otherwise China could ask WTO to adjudicate but procedure could take couple of years.
On economic data side, US manufacturing data due later today will be under spotlight. Data released yesterday indicated weakness in Japan’s manufacturing while manufacturing in China unexpectedly expanded. In Europe, Germany’s manufacturing weakened further and manufacturing in France, Italy and Spain recovered slightly, which resulted Eurozone total manufacturing PMI to edge up as well even though it remained in contraction area.