After two days of meetings in Washington, the US and China have released a joint statement saying that the $150 billion in tariffs that had been threatened to be imposed by President Donald Trump would be temporarily put on hold.
Though fundamental differences around trade issues remain unresolved between the two biggest economies in the world, it has soothed the investors for the time being. The decision indicated a possibility of de-escalation in tensions among the nations.
Another reason that we can expect peace talks is that the US is preparing for a historic summit with North Korea. China being an important political and economic ally of North Korea, its involvement will prove crucial in the decision making.
Markets also reacted positively to the decision. As the news set in, Asian stocks gained. The talks for negotiating a future framework to address the trade imbalance between the countries have indicated stabilization in the markets and strengthening of the US dollar; which has resulted in investors withdrawing their shelter in gold.
As demand reduces, prices go down and so on Monday, gold prices were down by an average of 0.3 percent. Gold is generally influenced by:
- the movement in US dollar- As the dollar strengthens, buying gold with the weaker rupee (or other currencies) gets expensive, lowers demands.
- International cues- interest rates of US bonds increased last week, moving investors wealth towards it in aims of stable returns.
- Increase in interest rates- Central banks of US (Federal Reserve) and well as India (RBI) are expected to increase interest rates in the upcoming monetary policy revisions, reducing the demand for a comparatively low-yielding investment in the metal.