Gold rose early Wednesday as investors who questioned the effectiveness of a phase-one trade deal between the U.S. and China leaned on the yellow metal as a hedge against uncertainty. An additional boost was felt this morning when the Producer Price Index (PPI) missed expectations.
Treasury Secretary Steven Mnuchin said late Tuesday that there’s no way for China to obtain relief from tariffs on billions of dollars in Chinese goods coming into the U.S. until the two parties reach a phase-two accord. The phase one agreement is due to be signed later Wednesday.
The tariffs are likely to remain until after the U.S. presidential election in November, and any move to reduce them will hinge on how well Beijing has complied with the phase-one agreement, unidentified people familiar with the matter told Bloomberg.
“These tariffs will stay in place until there’s a phase two. If the president gets a phase two quickly, he’ll consider releasing tariffs as part of phase two,” Mnuchin said. “If not, there won’t be any tariff relief. So it has nothing to do with the election or anything else. There’s no secret agreements.”
This morning, the U.S. Labor Department reported that the PPI rose 0.1% for December which was lower than economists’ forecast of a .2% increase. This mirrors the action of the core PPI (this does not include more volatile prices such as food or energy) which also rose .1% for December, missing the expected .2%.
Gold is seen as a safe-haven asset and typically gets a boost in times of economic or political uncertainty, such as the trade war with China and Mideast strife, and falls when tensions ease. February gold futures fell 0.4% Tuesday to settle at $1,544.60 an ounce on Comex. They declined 1% the first two days of this week.
The yellow metal surged above $1,600 an ounce for the first time in almost seven years last week amid geopolitical tensions between the U.S. and Iran that included a U.S. airstrike that killed a top Iranian commander and an Iranian missile attack on an Iraqi base housing U.S. forces.
In economic news, the U.S. consumer-price index data released Tuesday showed a slight increase in December and monthly underlying inflation slipped. CNBC reported that the data could allow the Federal Reserve to keep interest rates unchanged throughout the year. The Beige Book, the Fed’s summary of current economic conditions by district, is scheduled for release today. It is reported out eight times a year. Initial jobless claims come out Thursday and U.S. industrial production and consumer sentiment data are scheduled for Friday.
Silver slid 1.4% Tuesday to settle at $17.74 an ounce on Comex. The March futures contract decreased 2% in the first two days of this week. Spot palladium, a metal used primarily in autocatalysts, extended last week’s records to end Tuesday at $2,197.75 an ounce, up 2.9% on the day and 3.7% for the first two days of the week. Spot platinum also increased by 1% Tuesday.
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