Both Gold and Dollar Lower on Trade Troubles

Both gold and the U.S. dollar closed lower on the day as the current trade dispute between the United States and China continues to be unresolved, and the increased probability that Trump will impose additional tariffs is heightened.

This morning gold futures surged, trading to an intraday high of $1,218.00 per ounce before reversing direction and closing in the negative by $4.20. As of 4:30 PM Eastern standard time, the most active December Comex contract was trading at $1,206.60.

Gains witnessed in early trade activity were based upon a renewed optimism that the United States and China are headed back to the negotiation table in attempts to resolve the current trade dispute.

The U.S. dollar traded to an intraday high of 94.955, before trading lower on the day. Currently, the dollar index is trading almost 23 points lower and fixed at 94.54.

However, traders witnessed reversals in both gold and silver immediately following a tweet by Trump in which he stirred the pot rather than turning down the heat in regard to our current trade dispute.

According to the Washington Post, “President Trump on Thursday cast doubt on the possibility of a breakthrough in trade talks with China, saying he was prepared to hammer China’s economy with tough new economic penalties if Beijing doesn’t offer concessions.”

Trump tweeted that, “We are under no pressure to make a deal with China … They are under pressure to make a deal with us. Our markets are surging, there’s are collapsing. We will soon be taking billions in tariffs and making products at home. If we meet, we meet?”

Comments in the Washington Post article from Robert Holleyman, former deputy U.S. trade representative, said U.S. demands for fundamental changes in China’s state-directed economy would make for difficult talks. “We are a long way from finding a solution, and a solution will require some tough choices, especially on the part of China.”

The rapid shift in the optimistic market sentiment regarding resolving the current trade dispute between the United States and China quickly shifted to a pessimistic market sentiment immediately following today’s tweet by President Trump.

It seems that the current trade dispute is quickly becoming an out and out trade war. If Trump does impose an additional 200 billion in tariffs against Chinese imports, we could easily witness the point in time in which a trade dispute becomes a trade war.

Wishing you as always, good trading,