Gold Surges as Trade Tensions Escalate and Market Volatility Intensifies

Gold prices continued to gain value, moving higher in New York trading today, as market participants seek safety after president Donald Trump launched import tariffs against Canada and Mexico today launching a trade war against America’s largest and most important trading partners. 

As of 4:40 PM EST gold futures basis the most active April contract is fixed at $2925.10, after factoring in today’s gain of $21, or +072%. Gold has now risen for a second day as market participants look to move capital from into safe haven assets away from the volatility and devaluation of equities across the largest economies in the world. 

Today the Standard & Poor’s 500 declined by 1.22%, the NASDAQ composite declined by 0.35%, and the Dow composite declined by 1.63%. This follows weakness in equities across the globe. The Japan 225 index fell by 1.2%, the FTSE 100 index declined by 1.27%, the DAX index by 3.54%, and the Korean Composite Stock Index (KOSPI) fell by 3.86%.

After partially recapturing gold’s steep price declines last week, yesterday gains in gold moved its futures contract back above $2,900. Gains this week can be attributed to investors bullish sentiment and attraction to safe haven assets. This coupled with dollar weakness have moved gold prices substantially higher this week. 

In addition, the U.S. dollar faced significant pressure for the second day in a row. The rise in gold and fall of the dollar comes amid increasing safe-haven demand triggered by both economic concerns and escalating geopolitical tensions.

The dollar index declined by -0.95% yesterday, and to - 0.91% today taking the dollar index to 105.515. This week dollar weakness has been providing substantial support for gold's upward movement. 

Market participants are now fully focused on today’s implementation of U.S. tariffs on Canadian and Mexican imports, and how these will have a profound impact on inflation moving it higher

Both Canada. Mexico, and China have announced their intentions to initiate retaliatory tariffs on American imports. Today’s action coupled with recent tariffs on China have officially launched a large-scale trade war. This most certainly will increase imported goods in the United States, China, Mexico and Canada global inflation higher. This could also have the impact of simultaneously slowing global economic. 

Fears continue to grow as the fallout from Trump's tariff have yet to be felt. Because it is likely that these actions will ignite inflation and lead to a global contraction of economic growth, gold's traditional role as an inflation hedge and safe-haven asset will continue to increase as the gold to asset that can offer investors some safety during these uncertain times.

Wishing you, as always good trading,