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Gold Market Takes New Trade Tariffs In Stride

Kitco News

(Kitco News) - The gold market and the U.S. dollar are taking the latest U.S. tariffs on Chinese goods in stride as the price continues to hold critical support above $1,200 an ounce, at least for now.

Investor sentiment is modestly higher the day Tuesday after the Trump administration levied a 10% tariff on $200 billion in imported goods from China because analysts said that the measures weren’t as drastic as expected.

“The U.S. is going ahead with new tariffs on $200B of Chinese imports but the rate is 10% not the 25% or more it could have been. China, meanwhile, introduced tariffs on only $60B of U.S. imports opting not to bring in additional measures,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “These moves could be seen as leaving the door open for more talks and potentially finding a way for them to get out of this mess while saving face, perhaps after the midterm elections, sparking some relief among investors.”

The positive sentiment is modestly weighing on gold; December gold futures last traded at $1,203.40 an ounce, down 0.20% on the day. At the same time the U.S. Dollar Index last traded at 94.62, relatively flat on the day.

Although gold could be sensitive to near-term positive momentum, some analysts have said that the yellow metal could benefit the longer the trade war lasts.

“It is worth noting that investors are of the belief that robust economic growth will shield the United States from the impacts a global trade war may present,” said Lukman Otunuga, research analyst at FXTM “A scenario where a trade war disrupts global growth and weakens the U.S. economy could trigger some safe-haven flows into gold. This assumption is based on the dollar depreciating and losing its ‘safe-haven’ status.”

However, Otunuga said that the $1,200 level remains a critical level investors need to watch.

“Sustained weakness under this level may encourage a decline towards $1,191. Alternatively, a solid move above the $1,200 level could pave a path towards $1,211,” he said.

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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