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Markets Too Sanguine On Growing Global Trade Risks - BBH

Kitco News

Global equity markets have barely blinked after the Trump administration imposed a 10% tariff on $200 billion products imported from China; however, currency analysts at Brown Brothers Harriman say that markets are too sanguine on the potential risks of the ongoing trade war. They note that along with China, the U.S. has ongoing trade talks with Japan, Europe and looks to revamp the North America Free Trade Agreement. “Military strategists can attest to the difficulty of fighting a war on two fronts,” they say. “By our last count, the US is fighting one on four fronts.” Along with rising geopolitical uncertainty, the currency analyst also warns that the trade tensions should lead to higher inflation pressures. “The US has long-enjoyed cheap manufactured imports from China,” they say. “A 10% (rising to 25%) tariff will be passed on to consumers to some degree that that will add to the inflationary pressures already present in the US.”

By Neils Christensen of Kitco News;


MKS: Break Above $1,215 Would Make Gold Shorts Nervous  

Tuesday September 18, 2018 08:43

Should gold break above $1,215 an ounce, this could encourage buying in the form of shorts, or bearish traders, exiting the market, says MKS (Switzerland) S.A. Analysts note gold initially dipped below $1,200 an ounce in overnight Asia-Pacific trade before buying emerged. The trade war between the U.S. and China, and its impact on the foreign-exchange market, remains one of the key influences for gold. “Broad interest toward $1,193 remains supportive for bullion; however, should the greenback firm further, gold could extend through to $1,185,” MKS says. “Resistance at $1,215 is the key for an extension to $1,230, with recent shorts likely to become nervous around these levels.” As of 8:40 a.m. EDT, spot gold was down $1 to $1,200.10 an ounce.

By Allen Sykora of Kitco News;


Commerzbank: ETF Gold Outflows Hit 84 Tonnes In 3Q

Tuesday September 18, 2018 08:43

Outflows from gold exchange-traded funds so far in the third quarter are probably comparable to the amount of the precious metal that has been bought by central banks, says Commerzbank. The ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares. “Gold ETFs recorded outflows of 2.3 tonnes yesterday,” Commerzbank says. “A good 84 tonnes of gold have been withdrawn from the ETFs tracked by Bloomberg this quarter, which probably equates roughly to the amount bought by central banks.”

By Allen Sykora of Kitco News;


FXTM: Markets Show ‘Muted Response’ To Latest Trade-War Developments

Tuesday September 18, 2018 08:43

Global markets, including the U.S. dollar, are showing a muted reaction so far Tuesday to an escalation of the U.S.-China trade war, says Lukman Otunuga, research analyst at FXTM. U.S. President Donald Trump has imposed a 10% tariff on an additional $200 billion worth of Chinese goods. “Financial markets offered a fairly muted response to the announcement as the tariffs were already heavily priced into markets. Investors are instead likely to remain guarded and adopt a wait-and-see approach ahead of China’s possible retaliation to the latest round of U.S. tariffs,” Otunuga says. “In the currency markets, dollar bulls are interestingly nowhere to be found today despite simmering trade tensions weighing on investor confidence. Buying sentiment towards the greenback could receive a boost if Beijing’s potential reaction increases trade-war fears and promotes risk aversion from investors.” The analyst adds that even though the fundamental drivers behind dollar’s recent strength remain intact, the greenback is starting to look bearish on the daily technical charts. As of 8:25 a.m. EDT, the spot dollar index was 0.049 point higher to 94.125. The dollar is especially important to the metals markets since base and precious metals alike often move inversely to the U.S. currency.

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