The gold price has remained in a tight trading range over the last 3 weeks as the market tries to figure out whether the US will eventually reach a trade deal with China and this scenario has played a significant part in keeping the precious metal range bound
And another move that caught the market off guard on Monday, US President Donald Trump announced tariffs on steel and aluminum coming from Brazil and Argentina which in his words would protect American farmers and manufacturers which are such an important part of his electorate and are crucial if he is to be reelected in 2020.
"I gave them a big break on tariffs, but now I'm taking that break off. Because it's very unfair to our manufacturers and very unfair to our farmers." President Trump said.
There is also talk that he will hit the European Union with additional tariffs for subsidies it provides to the block’s biggest aircraft carrier Airbus, which directly competes with US company Boeing
The administration also threatened tariffs yesterday on $2.4 billion of French products, after releasing a report that said a new French tax on digital services unfairly targeted American companies.
All of these trade uncertainties is causing a big headache for the world economy, and it’s times like this when gold thrives on uncertainty so it should only be a matter of time before it resumes the uptrend which some say started a few years ago
“We’re still in that bull market that started in 2015. This is just the initial phase. We think in this cycle gold will hit a new high in U.S. dollars. Ultimately, we’ll get to $2,000, may take two or three years.” Said Sean Boyd, CEO of Agnico Eagle.
Golds recent slump below $1500 is nothing to worry about according to Mr Boyd and in comparison to other assets it is actually sitting okay.
“Gold’s fine. I think when we look at the current gold price, a little over $1,450, I think it’s actually doing quite well given where the general stock markets are,” he said.
The deadline for China and the US to sign off on phase one of their trade agreement is fast approaching and If the two sides cannot pin down an agreement by Dec. 15, additional U.S. tariffs on Chinese exports are set to go into effect.
This day is going to cause some major volatility in the markets which includes the gold price according to Chris Weston, head of research at Pepperstone Group Ltd
“We could face a wild day. The S&P 500 is likely to fall about 2%, with currencies including the yuan, Australian dollar and Korean won also likely to move. A relief rally may be in the offing afterward, particularly if there’s agreement to revisit talks in 2020. Mr Weston said