Unquestionably, China is preparing an offensive strategy to deal with, and respond to the recent tariffs levied on its country by the United States. Gold futures have gained almost $200 in the last two trading days. A price advance of $101.50 yesterday, followed by an additional $94.40 today. Currently, June gold has reached yet another all-time record high ($3195), and a new all-time record closing price of $3194.40.
After reaching the former all-time record closing price of $3190.20 on Wednesday, April 2, gold futures opened at $3196.60 on Thursday April 3. However, it also marked the beginning of a steep and brutal price correction in which gold would decline by $134.50 on Monday, April 7. On Tuesday, April 8 those that utilize Eastern trading methodologies specifically Japanese candlestick identification immediately recognized the type of candlestick that formed on gold’s daily chart; a “Doji”.
Possibly one of the most powerful single candlestick types, the word doji comes from the Japanese phrase meaning “the same thing”. A Doji is created when a session (in this case a daily chart) opens and closes at the same price or just a couple of ticks apart. To the Eastern market technician, the “doji” candle signifies market indecision, the point at which there is a balance between buyers and sellers. Its strength comes when it is identified after a strong price decline or advance. Its occurrence has a high probability of identifying a market consolidating before a major trend reversal.
Over the last two trading days investors have witnessed exactly that; a major trend reversal from a deeply bearish drop of $135 in three days, a doji candle followed by two strong price advances of almost $200.
The recent rise in gold prices occurred as investors and market participants continue to process trumps recent policy revision of imposing tariffs on trading partners. Then on Wednesday Trump announced a 90-day pause and lowered reciprocal taxes on U.S. trading partners that have not retaliated against the country over its new tariffs.
However, Trump increased China’s tariff level to 125%, which total 145% because of an earlier 20% percent tariff imposed by Trump. On Wednesday afternoon Trump posted the following, “At some point, hopefully in the near future, China will realize that the days of ripping off the U.S.A., and other Countries, is no longer sustainable or acceptable.”
China’s immediate response was to announce a new 50% tariff on U.S. exports raising the total tax on U.S. imports into China to 84%. According to MSNBC, “These include U.S. companies being added to a Chinese blacklist, a deal for the sale of Chinese social media company TikTok being paused, Chinese importers opting for agricultural commodities produced in countries other than the U.S., Chinese currency devaluation and large-scale government subsidization of the private sector.”
Adding that, “The war of words between the U.S. and China is reaching a fever pitch, and diplomats are spitting fire.”
The Chinese Ministry of Foreign Affairs said that the tariffs are isolating the United States from the rest of the world, an accusation that the U.S. is levied against China for its own trade practices. Yu Jin, a spokesperson for the Chinese Embassy in India, posted a clip of Trump in which the president says, “These countries are calling us up, kissing my ass. They are dying to make a deal.” “Really???” she responded to the clip. “Which countries are they???”
In my opinion, the war of words has created something much more alarming; the beginning of a full-blown trade war between China and the United States. What began as political rhetoric has transformed into concrete policy actions with real-world consequences that neither nation—nor the global community—can afford to ignore.
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Wishing you, as always good trading,
