Gold prices rose slightly in Asian trade on Tuesday, remaining in sight of a recent peak as safe haven demand for the yellow metal was underpinned by fears of a renewed U.S.-China trade war.
The yellow metal rose in overnight trade, tracking weakness in the dollar after U.S. President Donald Trump agreed to postpone plans to impose 25% tariffs on Canada and Mexico by 30 days.
But Trump gave no such forgiveness to China, with his 10% trade tariffs against Beijing having now come into effect from Tuesday.
China retaliated with tariffs on some goods and export controls on certain metals. China also added more U.S. firms to a list of unreliable entities and opened an antitrust investigation into Google (NASDAQ:GOOGL).
The dollar sharply curbed its recent losses after the China tariffs took effect, limiting upside in gold.
Spot gold rose marginally to $2,815.35 an ounce, while gold futures expiring in March fell 0.4% to $2,846.64 an ounce. But spot prices remained close to a record high of $2,831.70 an ounce hit last week.
Gold set for more haven demand as global trade war brews
Gold’s recent record high was driven chiefly by concerns over a renewed global trade war in face of Trump’s tariff agenda.
While his postponement of Canadian and Mexican tariffs offered some relief, China still represents a major portion of U.S. imports. The country is the third-largest U.S. trading partner, behind Mexico and Canada.
Import tariffs on China also stand to have a much greater impact on the global economy, given the country’s dominant role in international trade.
Gold upside limited as tariffs fuel rate jitters
Retaliatory measures from Beijing could also draw more ire from Trump, escalating the war. Trump had warned against any retaliation over his tariffs.
But while gold benefited from haven demand, bullion’s long-term outlook now appeared clouded by uncertainty over U.S. inflation and interest rates.
Analysts and Federal Reserve officials had warned that U.S. trade tariffs- which will be paid by local importers- stood to increase domestic inflation and underpin interest rates. The dollar surged on this notion, trading close to an over two-year high.
Gold’s gains were limited by this trend, while other precious metals retreated. Platinum futures fell 0.1% to $1,002.05 an ounce, while silver futures fell 0.5% to $32.350 an ounce.
Among industrial metals, copper futures on the London Metal Exchange rose 0.2% to $9,150.15 a ton, while April copper futures fell 0.1% to $4.3250 a pound.
Traders were now waiting to see whether China- the world’s biggest copper importer- would dole out more economic support to offset the impact of the U.S. trade tariffs.
