While trade tensions and global growth concerns keep supporting gold prices, yellow metal rose sharply above $1,350 an ounce following rising geopolitical tensions due US blaming Iran for tanker attacks in Gulf of Oman and growth worries due to weak Chinese data released today. Tensions between the US and Iran increased as US Secretary of State Mike Pompeo stated that Iran was behind the oil tanker attacks while Iranian government denied the claims and called for regional dialogue. In the meantime, more than 600 companies sent a joint letter to Trump administration and called for an urgent end to trade war while stating trade dispute with China had been damaging American companies. In addition to this, White House Economic Advisor Larry Kudlow said there would be consequences if Chinese leader Xi Jinping was not to meet US President Donald Trump at G20 summit. Data released in China today showed industrial production decreased to the lowest level since 2002 in May.
Given that gold has been supported by trade tensions between the US and China as well as worries on global growth, yellow metal jumped above $1,350 an ounce on Friday and hit the highest since April 2018 at $1,358 due to increasing trade tensions between the US and Iran following tanker attacks in Gulf of Oman and growth worries following weak Chinese data.
As of 16:05, spot gold was trading at $1,350.05 an ounce while dollar index was up to 97.30. US 10-year Treasury yield edged up to 2.103.
As regional tensions increased following attacks to two oil tankers, one Japan-owned and one Norwegian-owner, in Gulf of Oman, dispute between the US and Iran escalated following US Secretary of State Mike Pompeo’s statements holding Iran responsible for the attacks. US Central Command spokesman released a video footage showing a boat, claimed to be Iranian, attacking the tankers however Iranian government denied the claims. As both sides stated they did not want to escalate regional tensions, Iranian officials said they did not want to initiate a war but they would take necessary measures it there were aggressive actions against its interests. Dispute between two countries had escalated earlier when US imposed sanctions against Iran and Iran stated it would stop oil trade in Strait of Hormuz if it was not allowed to sell oil.
In the meantime as trade dispute between the US and China persists, over 600 companies sent a joint letter to Trump administration on Thursday, urging US government to end trade dispute with China while stating it had been damaging American companies. Letter said business world was concerned over escalating tit-for-tat tariffs and imposing tariffs on wide range of goods was not an efficient tool to change China’s unfair trade practices while underlining tariffs were paid by American companies, not by China.
In addition to this, White House Economic Advisor Larry Kudlow said yesterday that US President wanted to meet Chinese leader Xi Jinping but it was not scheduled yet while adding there would be consequences if Xi was not to meet Trump at G20 at the end of June in Japan. Trump stated earlier that he would impose new tariffs on Chinese goods worth $300 billion if there was no meeting with Xi at G20.
Data released today in China showed that industrial production grew at the lowest level since 2002 in May. While industrial production growth decreased to 5% from 5.4%, Chinese Vice Premier Liu He signalled more economic stimulus by stating Beijing has many policy tools to support economy. However, Chinese economy continues to slow down despite economic stimulus and weakness in domestic demand persists. Another data showed that retail sales recovered from 16-year low of 7.2% and increased by 8.6% however this was stated to likely happen due to higher inflation rather than recovery in consumer sentiment.