After rising sharply above $1,550 on Monday due to escalation in trade tension between the US and China, gold prices pulled back after sides stated their will to continue trade negotiations however yellow metal keeps its upside momentum on Tuesday. As escalating trade tensions also cause worries on global economic outlook, data released today showed industrial profits in China recovered in July however negative outlook persisted. On the other hand in Germany, where Ifo business climate index hit seven-year low in August, detailed data confirmed the economy contracted in the Q2 and showed contraction was mostly due to deteriorating exports which had been hit by trade dispute and slowing global economy.
Gold prices hit $1,554 on Monday due to escalation in trade war between the US and China and then declined as sides pointed out their will to continue negotiations however outlook for yellow metal is still positive and it keeps its upside momentum on Tuesday.
As of 18:33 GMT+3, gold was trading at $1,541.88 an ounce while dollar index was at 98.03. US 10-year Treasury yield was down to 1.479.
Saxo Bank analyst Ole Hansen said on Reuters that main focus was on US-China trade developments while stating there would be no reason to sell gold with data indicating recession in Germany. Hansen added market would not precisely change even though sides toned down their rhetoric regarding trade dispute.
Trade tensions escalated after China announced last Friday that it would impose additional tariffs on US goods worth $75 billion and then the US retaliated by increasing current and planned tariffs on Chinese goods by 5%.
As trade tensions also increased worries on global economic outlook, data released today showed industrial profits in China recovered in July however economic outlook will still likely be under pressure by trade dispute and slowing global economy. As industrial profits increased 2.6% in July after contracting 3.1% in June, senior statistician Zhu Hong said on Reuters that downside pressure on economic outlook was high while adding volatility and uncertainty in industrial profits would likely persist due to slowing domestic demand and falling industrial products prices.
In Germany, detailed data released today confirmed that the economy contracted in the Q2 while showing uncertainty regarding economic outlook persisted which would likely lead the country into a recession following weak business confidence data. Data showed German economy contracted by 0.1% in the Q2 and this was mostly due to weakening exports that had been hit by trade dispute and slowing global economy. Despite this, household and fiscal spending alongside with private sector investments increased which showed the situation was not as bad as anticipated and that German economy could easily recover in case of positive developments regarding trade dispute between the US and China. Apart from this, German government is expected to increase its fiscal spending to help recovering economic confidence.