Gold up on Chinese tariff news after falling earlier this morning. Before the tariff news, it had appeared gold was headed for the first weekly decline in four weeks.
The Chinese State Council announced a decision to impose tariffs ranging from 5% to 10% on $75 billion U.S. goods. The tariffs would take effect in two stages on Sep. 1 and Dec. 15. China also said a it would impose a 25% tariff on U.S. cars and a 5% on auto parts, which will go into effect on Dec.15. These tariffs are in retaliation for additional U.S. tariffs announced earlier this month.
The Dow is now set to drop 100 points on the news, while gold got a shot in the arm. December gold futures had slid 0.5% Thursday to settle at $1,508.50 an ounce on Comex, with prices down 1% so far this week. After the tariff news hit, the December contract rose to $1,510.9 and is now up to $1,514.10.
Meanwhile, the markets are still awaiting signals on U.S. monetary policy from the speech by U.S. Federal Reserve Chairman Jerome Powell, at 10 am EDT this morning, during the Economic Policy Symposium in Jackson Hole, Wyoming.
Earlier this week, remarks from some Fed policy makers revealed some divisions on whether to implement another interest-rate cut at the Federal Open Market Committee’s meeting in September. So Powell’s address this morning at the Fed’s annual symposium is seen as critical. The Jackson Hole event, which started Thursday, gathers dozens of central bankers, policymakers, academics and economists from around the world.
Prior to the Chinese Tariff news this morning, the CME FedWatch Tool had lowered the odds of a Sept. 18 Fed rate cut to 93.5% after keeping expectations of a rate cut had been at 100% for over a month. NOW, the odds are back at 100% with the chance of a 25-basis-point reduction at 99.6% and the chance of a 50-basis-point reduction at 0.4%.
President Donald Trump has called repeatedly for a large cut. But three Fed policymakers were on the record before Powell’s speech resisting the idea that the U.S. economy needs lower interest, and a fourth said he wants to avoid taking action “unless we have to,” Bloomberg reported.
The G7 summit this weekend in France may also shed some light on the state of the global economy and the trade issues.
China has partially lifted restrictions on imports of gold, Reuters reported Thursday, citing unidentified bullion-industry sources. The move loosens curbs that had stopped an estimated 300-500 metric tons of the metal – worth $15 billion to $25 billion at current prices – from entering the country since May.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.34% Thursday to 854.84 metric tons, Reuters reported.
Silver futures retreated along with gold early Friday. September futures on Thursday settled at $17.12 an ounce on Comex, outpacing gold’s decline.
Both spot platinum and spot palladium were lower early Friday but are higher for the week. Platinum rose 0.8% in the first four days of the week, while palladium increased 2.5% but has slid this morning on news of new Chinese tariffs on automobiles.
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