Gold has posted sharp losses in the Tuesday session. In North American trade, the spot price for one ounce of gold is $1192.75, down 0.72% on the day. Earlier in the day, gold prices dropped to $1189, their lowest level since August 24. On the release front, ISM Manufacturing PMI jumped to 61.3, well above the estimate of 57.6 points.
Escalating trade tensions have boosted the U.S dollar, at the expense of gold as well as other currencies. The dollar is benefiting from being the primary reserve currency. The most important trade dispute, which could cause serious damage to the global economy, is the spat between the U.S and China. So far, the two economic giants have imposed $50 billion in tariffs on each other, and President Trump has threatened further tariffs worth some $200 billion, which could be imposed as early as Thursday. The U.S could elect to impose the tariffs in smaller bites, such as a $50 billion tariff. Trade talks continue between the U.S and Canada, as the NAFTA agreement, worth some $1 trillion in trade, has yet to be finalized. The EU has also engaged in a tit-for-tat tariff exchange with the United States, and Japan has also been subject to U.S tariffs. With the U.S economy running smoothly and showing little ill-effect from the tariffs, President Trump could be emboldened to ratchet up tariffs, particularly against China. If the trade tensions worsen, the US currency could continue to gain ground and gold prices could suffer.
