While trade tensions escalated further between the US and China due to US imposing sanctions on Chinese tech company Huawei, gold prices declined sharply yesterday due to increasing dollar index following robust housing starts and jobless claims data released in the US. Besides, safe haven demand decreased as risk sentiment increased and gold prices steady on Friday. It is unclear whether trade talks between the US and China will resume as Chinese government said yesterday on People’s Daily that there would be nothing to talk about without sincerity. In the meantime, Eurozone consumer inflation in April increased as expected while core consumer inflation was above expectations, according to data released on Friday.
As US President Donald Trump’s executive order followed by Department of Commerce blacklisting Chinese tech company Huawei and banning the company from buying American technology without government approval escalated trade tensions between the US and China, gold prices steady on Friday, after seeing worst daily fall in a month yesterday due to rising dollar index following robust US data showing that housing starts data was above expectations in April while jobless claims data last week was below expectations.
As of 15:23 GMT+3, spot gold was trading at 1,285.68 an ounce while dollar index was at 97.86. US 10-year Treasury bond was down to 2.370.
CMC Markets market analyst Margaret Yang Yan said on Reuters that risk sentiment in Asia faded slightly due to US imposing sanctions on Huawei and added gold was supported but upside movement was limited because of strong dollar.
While trade tensions escalated further due to US banning Chinese tech company Huawei from buying Amerikan technology which is vital for its production, it is not clear whether (or when) trade talks between two counties will resume, despite conciliatory tone from both sides. Chinese government said yesterday on People’s Daily that US was not sincere of continuing trade talks and damaged the atmosphere for negotiations. China stated there would be no point of resuming talks without sincerity and added even if talks were to continue, it would not be fruitful without the US addressing China’s concerns. Moreover, it was stated that China could stop the negotiations and continue its usual routine by retaliating possible tariff increases and taking necessary measures. By the way, China Ministry of Commerce said it did not have any info of US officials’ plan to visit China.
In the meantime, Eurozone consumer inflation was 1.7% in April as expected and up from March’s 1.4%, according to Eurostat data released today. However, monthly consumer inflation was down to 0.7% in April from 1% in March. Moreover, core consumer inflation, which is followed by European Central Bank to determine its monetary policy, was above expectations and increased to 1.4% in April from 1% in March. While released data is good for ECB since it targets 2% consumer inflation however it was stated that the increase was mostly due to Easter holiday.