Gold benefits from worries about delay in US-China trade deal

Bengaluru — Gold prices inched up on Thursday, supported by concerns that US bills on Hong Kong could increase tension between the US and China and delay an interim trade deal. Spot gold rose 0.1% to $1,471.93/oz by 2.35am GMT. US gold futures were down 0.1% at $1,472.20/oz.

“The main driver in gold currently is the uncertainty about the trade deal. There is the possibility that the deal might not be completed this year, so that is a key support factor,” said John Sharma, an economist with National Australia Bank.

Completion of a “phase one” trade deal could slide into 2020, trade experts and people close to the White House said. The protracted trade dispute has pushed the precious metal, which is considered a safe asset in times of political and economic uncertainty, about 14% higher in 2019.

Dialling up tension, the US House of Representatives passed two bills to back protesters in Hong Kong and send a warning to China about human rights, with President Donald Trump expected to sign them into law. This comes after China condemned Washington’s interference in the Hong Kong affairs and summoned an US embassy official to demand that the US stop its meddling.

“That (Hong Kong bills) could pose challenges to the trade deal … there might be some progress because both the countries will see there is some benefit to co-operation, but the quality and duration (of a deal) is uncertain,” Sharma said.

Lower global shares and a tad weaker dollar index also supported the precious metal. Minutes from the US Federal Reserve’s October policy meeting released on Wednesday offered little guidance on what would cause policymakers to change their minds on the interest rate outlook.

The Fed has cut interest rates three times in 2019. The cuts have been positioned as “a mid-cycle adjustment” to help shield the US economy from the effects of the US-China trade war and slowing global growth, which have hurt manufacturing, business investment and exports.

Lower interest rates reduce the opportunity cost for holding the non-yielding bullion. Under investors’ radar now is the US weekly initial jobless claims due at 1.30pm GMT.

Elsewhere, silver shed 0.1% to $17.12/oz. Silver demand will creep up by 1% in 2019, reducing global oversupply of the metal to the lowest since 2015, consultancy Metals Focus said in a report. Palladium fell 0.2% to $1,763.66/oz and platinum was down 0.2% to $915.20/oz. 

Reuters