Gold rises as investors seek safety from US-China deal shocks

Bengaluru — Gold prices rose on Wednesday as investors sought safer assets amid uncertainty about the effectiveness of the US-China Phase 1 trade deal after a top US official said tariffs on Chinese goods would stay in place even after the agreement is signed.

Spot gold rose 0.3% to $1,551.38/oz by 0332 GMT. Prices fell to their lowest since January 3 at $1,535.63 on Tuesday. US gold futures gained 0.5% to $1,552.30.

Just a day before the world’s top two economies prepared to sign a Phase 1 trade deal, US treasury secretary Steven Mnuchin said tariffs on Chinese goods will be in place until the completion of a Phase 2 agreement. Keeping the tariffs could reduce the economic benefits of the Phase 1 deal by limiting China’s access to its second-largest trading market.

“Overnight reports that the US would keep existing tariffs in place at least until after the US election … has obviously rattled markets a bit and that has been somewhat supportive for gold prices,” said ING analyst Warren Patterson. “I struggle to see gold trading below $1,500 for a sustainable period of time, over the next year or so, largely as a result of this trade uncertainty.”

Gold rose 18% in 2019 mainly because of the 18-month long tariff dispute and its effect on the global economy.

Further supporting bullion, Asian stocks slipped as Mnuchin’s comments somewhat dented risk sentiment. Investors were keenly awaiting the details of the Phase 1 agreement, which Mnuchin said would be released later in the day and will be fully enforceable. A source on Tuesday said China has pledged to buy almost $80bn of additional manufactured goods from the US over the next two years as part of a truce, though some US trade experts call it an unrealistic target.

Concerns over friction in US-China ties also remained with the US nearing publication of a rule that would block shipments of foreign-made goods to China’s Huawei, two sources said. The Federal Reserve’s Beige Book, a summary of commentary on economic conditions, was due at 1900 GMT.

Palladium rose to a record $2,204.29/oz earlier in the session, and was up 0.2% at $2,197.81. “The underlying fundamentals with tight supply and demand balance is the key factor which continues to be supportive for prices,” ING’s Patterson said. The metal, used for catalytic converters in car exhaust systems, gained about 54% in 2019 on a sustained supply deficit. Silver rose 0.3% to $17.83/oz, while platinum advanced 0.6% to $989.03.