Optimism regarding US-China trade relations alongside with reporting earnings in the US increased risk sentiment and weighed on the precious metal yesterday but gold prices rose on Wednesday as geopolitical tensions escalated due to US bill regarding the situation in Hong Kong alongside with Brexit uncertainty. Yesterday, US House of Representatives approved a bill requesting that US Department of State should consider whether it would be needed for the US to change Hong Kong’s special trading status, which escalated tensions again between the US and China and China side said they would need to enact effective countermeasures if the bill was to pass into law. In the meantime on Brexit side, EU and British officials were reported to made progress in talks yesterday however uncertainty whether the deal will be reached is still uncertain since Northern Ireland’s Democratic Union Party is cautious to custom solutions. On economic data side, data released today showed consumer inflation in Eurozone declined to its 3-year low in September.
After falling sharply yesterday due to reviving risk sentiment yesterday, gold prices rose on Wednesday amid rising geopolitical tensions.
As of 16:02 GMT+3, spot gold was trading at $1,491.85 an ounce while dollar index was at 98.25. US 10-year Treasury yield was down to 1.743.
US House of Representatives approved a bill that requests US Department of State to consider whether the US would need to change Hong Kong’s special trading status due to recent developments and rising tensions in the city. Moreover, the bill foresees barring exports of crowd-control items such as teargas beside supporting Hong Kong people’s right to protest and condemning Chinese interference in its affairs. The bill is not yet legislated however China said it would need to enact effective countermeasures to protect its sovereignty and security if it was to pass into law. Moreover, Hong Kong administration also rejected the US bill and stated foreign legislators should not interfere in the region’s own affairs. For the bill to pass into law, it needs to be approved by the Senate and then be sent to President Trump for final approval.
In the meantime on Brexit side, it was reported that EU and British officials made progress in talks yesterday however it is still uncertain whether sides will agree on a deal ahead of EU leaders’ summit tomorrow. In a new proposal, Northern Ireland will be a part of the UK and goods coming from Britain to Northern Ireland will be subject to tariffs and checks if they will be sent to Ireland and other bloc countries. However, Northern Ireland’s Democratic Union Party, which Prime Minister Boris Johnson needs support from in the parliament, does not want Northern İreland to act under EU rules which causes uncertainty to remain. Moreover, even if EU and British officials agreed on a deal, it would still need to be approved by British parliament. So, PM Boris Johnson will most likely need to ask for postponing Brexit date if the deal remains disapproved.
On economic data side, data released today showed consumer inflation in Eurozone, where manufacturing sector is in ongoing contraction, fell to its lowest level in three years in September. According to the data, consumer inflation fell to 0.8% from 1% in September while core inflation edged up to 1% from 0.9%. Rising prices in services sector contributed the most while falling energy prices dragged down inflation.