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Gold Prices Move Above $1,300 on Weaker Dollar and China Trade Fears

May 24, 2018 at 15:01 by Matt Jackson

Gold prices have risen during Thursday’s trading, thanks to a weaker dollar and concerns over trade deals between the USA and China. The safe haven metal is now trading above $1,300.

Minutes from the Federal Reserve’s latest meeting confirmed the market’s suspicions that interest rates would rise in June. it is now widely expected that rates will rise, as the minutes read that “if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation.”

The news caused the dollar to weaken and, subsequently, dollar-denominated assets, like gold, strengthened. A drop in the price of the dollar makes gold more affordable to foreign investors and increases demand for the precious metal.

An escalation of tensions between the USA and China only served to further push prices up. On Wednesday, Trump tweeted that the “trade deal with China is moving along nicely” but went on to say “in the end we will probably have to use a different structure in that this will be too hard to get done…”

China and the USA have been exchanging shots with one another, in the shape of an ever increasing range of tariffs on one another’s products and exports. Although there has been some suggestion that China will soften tariffs on US autos, and have said that they will buy more US agricultural and energy products, the news has done little to appease most analysts and investors.

Trump’s critics have stated that he has paid too much attention to trade deficit, effectively overlooking the issue of intellectual theft from US businesses. A paper by market economists Capital Economics concluded that “tensions over trade policy will almost certainly flare up again in the coming months” — a sentiment that the market seems to share, if price movement is any indication.

Gold prices had risen 0.92% to $1,305.80 at 15:45 GMT.

If you have any questions and comments on commodities today, use the form below to reply.

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