While gold trades in a range following its sharp fall on Monday due to ended trade dispute between the US and Mexico, US President Donald Trump said yesterday that tariffs would be reinstated if trade deal terms were not to be approved by Mexico’s Congress. As trade tensions between the US and China persists, Trump also said new tariffs would be imposed on Chinese goods in case of China’s leader Xi Jinping not attending G20 summit at the end of June in Japan. In the meantime, following weak growth data released in the UK yesterday, Bank of England policy maker Michael Saunders said this was not a surprise due to automobile manufacturers having suspended their operations due to Brexit uncertainty. Saunders also said Bank of England would not need to wait until uncertainty around Brexit was resolved. By the way, UK’s unemployment level did not change in April at 44-year low, according to data released today.
Gold prices were supported on Tuesday by persisting trade dispute between the US and China as well as expectations that Fed would cut interest rates this year more than once, following its decrease on Monday due to resolved trade tensions between the US and Mexico, and yellow metal trades in a range even though prices decreased down to $1,320 an ounce during the day.
As of 15:56 GMT+3, spot gold was trading at $1,324.08 an ounce while dollar index was at 96.80. US 10-year Treasury yield increased to 2.161.
ANZ analyst Daniel Hynes said on Reuters that resolved trade dispute between the US and Mexico weighed on gold market but that did not relieve concerns over trade dispute between the US and China while adding persisting trade tensions were still supporting yellow metal.
Regarding trade deal reached between the US and Mexico last week, US President Donald Trump said on Monday that he did not think there would be a problem but warned tariffs would be reinstated if Mexico’s Congress were not to approve the trade deal terms, without giving further details what these terms were. At the end of May, Trump threatened to impose 5% tariffs on all Mexican goods unless Mexican government took necessary precautions to prevent illegal immigration and later on after the deal, he announced that tariffs were suspended indefinitely.
Trade tensions between the US and China persist. Trump said yesterday that he was planning to meet Chinese leader Xi Jinping at the end of June at G20 summit in Japan while adding, new tariffs would be imposed on Chinese goods if Xi was not to attend the summit. Trump said China would want to make a deal with the US since companies had been leaving China due to tariffs and this would hurt Chinese economy. Moreover, US Treasury Secretary Steven Mnuchin said Trump would be happy to tax more Chinese goods in case of no deal in possible meeting between Trump and Xi.
In the meantime, while data released yesterday showed that UK economy contracted by 0.4% in April due to falling car production, Bank of England (BOE) policy maker Michael Saunders said this was not a surprise due to stockpiling in the first quarter ahead of Brexit while adding growth recovery would be seen in the coming months as carmakers that suspended production due to Brexit uncertainty at the end of March had restarted their operations. Saunders also said BOE would not need to wait for Brexit to be resolved to raise interest rates and in case of smooth Brexit, central bank could hike the rates as excess demand and increasing consumer spending were expected in the next two or three years alongside with close-to-target inflation. In addition to this, unemployment level in the UK was steady at 44-year low of 3.8%, according to data released today.