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James Hyerczyk
Comex Gold

Gold futures are trading slightly lower early Wednesday in reaction to a firmer U.S. Dollar amid escalating trade tensions between the United States and China. Late Tuesday, the Trump administration announced new tariffs of 10 percent on an extra $200 billion worth of Chinese imports.

At 0820 GMT, August Comex Gold settled at $1253.60, down $1.80 or -0.14%.

The early price action suggests a downside bias, but the limited follow-through selling indicates investors are waiting for a better response from the U.S. Dollar before making their next move. So far the reaction to the tariff news has been normal. Investors initially sold-off risky investments and bought safe-haven Japanese Yen and Treasury Bonds. Once again, gold was ignored as a so-called “safe-haven” asset.

In other news, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.22 percent of 799.02 tonnes on Tuesday from 800.77 tonnes on Monday.

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Later today, investors are likely to sweep aside concerns over the trade dispute between the United States and China to focus on fresh U.S. economic data.

Core Producer Price Inflation is expected to come in at 0.2%. PPI is also expected to rise 0.2%. Final Wholesale Inventories are expected to come in at 0.5%, unchanged from the previous month.

A couple of Fed speakers are also on tap. FOMC Member Bostic is expected to speak at 1630 GMT and FOMC Member Williams at 2030 GMT. Both could move the markets if in addition to comments about monetary policy and the future of interest rates, they discuss the impact of tariffs on economic growth.

Gold traders will also be monitoring the 10-year Bond Auction. Investors are expected to demand a 2.96 percent yield.

Based on the early price action, investors are likely to react to the direction of the U.S. Dollar. If the dollar is used as a safe haven asset then look for gold prices to weaken.

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