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Trade War Tensions Ease But Traders Bid Both Gold And Equities Higher

Commentaries & Views

After dropping over 1100 points on Thursday and Friday of last week, the Dow Jones Industrial Average has staged a dynamic recovery today. As of 3:30 PM Eastern standard time, it is trading 622 points higher at 24,155. This recovery is the result of an easing of tensions regarding the possibility that there will be a trade war between China and the United States.

In an interview with Fox News Treasury, Secretary Stephen Mnuchin said that he is “cautiously hopeful” that China will reach a deal to avoid tariffs on the proposed $50 billion of US exports.

European leaders were insistent on gaining a permanent exclusion and a deal was struck with South Korea.

Although there seems to be a potential easing in the tension created by the real possibility of a trade war, traders and market participants also continue to favor safe-haven assets with physical gold gaining five dollars and gold futures gaining 2 ½ dollars.

These gains are based off the intraday highs achieved today that were primarily based on U.S. dollar weakness. Currently, the dollar index is fixed at 88.62 which is a net decline of almost a half a percent.

According to the Kitco Gold Index, the gain today of $4.90 in physical gold is composed of a $7.00 gain due to dollar weakness, and a $2.10 decline due to traders bidding the precious yellow metal lower.

Gold has traded higher over the last four trading sessions and although today’s gains were entirely dollar weakness based, last week’s gains were a combination of dollar weakness and buying.

Even though there is a possibility that this current tension will not result in a trade war, there is still a distinct possibility that such an outcome is unavoidable. However, at least for now, possible progress in negotiations has put a cap on the upside gains in gold.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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