International spot gold was trading at $1,555.80 an ounce in early trading. The price of gold fluctuated sharply in the previous session on the back of mood swings, surging as high as $1,568.50 an ounce in the Asia-pacific session, before tumbling back from there to as low as $1,546.20 before slipping back into volatile mode.
US President Donald Trump on Tuesday threatened to seriously consider imposing tariffs on cars imported from Europe if a fair deal is not reached. However, he later said he wanted to reach a deal with the EU on car tariffs. In addition, he threatened to impose a 100% tariff on French wine. The Commerce Department later confirmed that it had not issued the auto report, saying it would hamper “ongoing negotiations between Europe and the United States on auto tariffs.” That has again raised trade tensions between the U.S. and the European Union, and markets are in a risk-off mood.
On the other hand, the outbreak of the new coronavirus has attracted worldwide attention just before the Spring Festival. China has confirmed 324 new cases of coronavirus pneumonia in 14 provinces as of 7 am Tuesday, according to CCTV news. The national health commission has been working with relevant departments to prevent and control the outbreak of pneumonia caused by the new coronavirus. Meanwhile, the U.S. centers for disease control and prevention reported its first case of the new coronavirus. On the news, risk aversion spread, with safe-haven currencies such as the yen and Swiss franc rising and the renminbi falling, while spot gold retreated quickly after a surgeon fears it was overbought and taking profits.
Trump takes aim at the EU! It threatened to impose a 100% tariff on France
US President Donald Trump said on Tuesday he was not bluffing about the possibility of imposing tariffs on European cars.
“They know that if they can’t get a fair deal, I’m going to put tariffs on them,” Mr. Trump told the Wall Street journal.
Mr. Trump’s threat to impose tariffs on a key European export has again raised trade tensions between the United States and the European Union, prompting a backlash from European officials and businesses. The White House has repeatedly delayed a decision on whether to impose tariffs on cars from Europe. Mr. Trump did not give a deadline for a tariff decision.
In addition, Mr. Trump allegedly threatened to impose a 100 percent tariff on French wine.
Trump’s comments on Tuesday came as government and business leaders, including German chancellor Angela Merkel and European Commission President Stephane von der leyen, gathered at the world economic forum in Davos, Switzerland. Mr. Trump met with Ms. Von der leyen on Tuesday after an interview with the Wall Street journal.
Although he did not mention the auto tariffs in an interview with reporters, he said, “we’re going to talk about a major trade deal, we’ve been talking about it for some time.”
Last week, the Washington Post reported that Trump had threatened to impose a 25 percent tariff on European cars if Germany, France, and Britain did not accuse Iran of violating the terms of the 2015 nuclear deal.
In 2018, trump angered the EU by not excluding it from tariffs on steel and aluminum imports.
In October, the world trade organization cleared the way for the United States to impose tariffs on $7.5 billion worth of European Union goods. It ruled that the EU had unfairly subsidized the aircraft maker airbus.
Trump delivered the keynote address at the world economic forum in Davos 2020 on Tuesday. Speaking at the forum earlier on Tuesday, Mr. Trump praised tariffs for helping bring trading partners to the negotiating table. Mr. Trump said that “perhaps the most transformative aspect” of the US economy since he took office was “our trade reform”.
The new coronavirus has the momentum to spread risk waves hit the market
The renminbi fell off a six-month high against the dollar on Tuesday, while the safe-haven yen rose as a new outbreak of coronavirus infection in China triggered a sudden bout of risk aversion and spooked global markets.
As hundreds of millions of Chinese prepare for the lunar New Year holiday, concerns have been raised about a new type of coronavirus pneumonia in the city of Wuhan.
China has confirmed 324 new cases of coronavirus pneumonia in 14 provinces as of 7 am Tuesday, according to CCTV news. The national health commission has been working with relevant departments to prevent and control the outbreak of pneumonia caused by the new coronavirus.
Meanwhile, the U.S. centers for disease control and prevention said Tuesday that a Chinese tourist in Seattle has been confirmed as the first case of the new coronavirus in the United States.
The US centers for disease control and prevention (CDC) has confirmed that a man in Washington state has been diagnosed with the coronavirus virus, the first case reported in the US since a pneumonia-like illness first appeared in Wuhan last month. The man is in stable condition and his nationality has not been released.
Bank of Korea officials recently said fears of new coronavirus pneumonia could affect consumer sentiment and local spending.
Global stock markets fell as the outbreak revived memories of SARS in 2002-2003. SARS, another coronavirus, broke out in China, killing nearly 800 people worldwide.
A coronavirus outbreak in Wuhan sent ripples through financial markets and the world health organization met on Wednesday to consider declaring an international health emergency.
Kit Juckes, the analyst at Societe General, said: “The yen and Swiss franc have strengthened and risk aversion is spreading across all sectors. It would be very surprised if it could change the future, but it’s still early days.”
“The market is attributing the selling to sars-like concerns in China, but it’s hard to know if that’s true or if it’s a big reversal in recent price movements,” said Lee Hardman, currency analyst at Mitsubishi ufj in Tokyo.
Gold has been supported by its perceived safety in times of financial and political turmoil.
“Panic in China is one of the drivers of gold’s rally, but there is no strong evidence that gold is rising in an epidemic fashion,” said Craig Erlam, an analyst at OANDA. He added that some investors were taking profits after the gold rally earlier in the day.
“However, unless the healthcare crisis in China escalates dramatically and becomes a regional issue, it is difficult to see gold above $1,600,” Jeffrey Halley, senior market analyst at OANDA, said in a note.
Separately, on the physical side, China’s gold consumption fell in 2019 for the first time in three years, according to data released by the China gold association on Tuesday, as high prices and a slowing economy hit buying in the world’s largest gold market.