Just an hour after the new US tariffs on Chinese imports kicked-in on Monday, China cancelled its negotiation talks with the world's largest economy. Beijing's vice premier Liu He was proposed to meet with the Trump administration in Washington to have mid-level trade talks. A news report suggested that China will block any potential negotiations unless US president Trump withdraws his threats of further tariffs on the country.
Last week, China announced retaliatory tariffs on US products worth $60 billion after the US did not withdraw its duties on Chinese imports worth $200 billion effective from Monday. Trump has been repeatedly threatening to add duties on remaining imports from its trade partner if it retaliates.
"The door for trade talks is always open but negotiations must be held in an environment of mutual respect," but "cannot be carried out under the threat of tariffs," a state-run Xinhua news agency quoted a statement from its government.
As investors awaited the decision from the US Federal Reserve's two-day meeting this Tuesday where interest rates are highly anticipated to be hiked, the dollar valuation strengthened. The spat between the US and China further encouraged the markets to move to the US dollar over gold.
In the international markets, the yellow metal has been reacting inversely to the movement of the dollar index. Spot gold has fallen over 12 percent since April, which is when the trade conflict between two biggest economies of the world intensified. Gold prices across various cities in the country are impacted by the market trend overseas.
On the contrary, Bank of America Merrill Lynch has forecasted that the trade war will damage the US economy, resulting in the bullion to reach an average valuation of $1,350 an ounce (currently at $1,198.36 an ounce) in 2019.
Additionally, the latest Assocham-World Gold Council report states that the higher minimum support price offered to farmers (which will increase their purchasing power) could push the gold prices in India by 25 percent in the second half of the financial year 2018-19. "Indian gold consumption was tepid in the first half of this year. ...Demand for gold is likely to surge in the second half of the year thanks to a good outlook for farmers," it said.