Today’s decline is the result of a couple of factors, including a stronger dollar and the perception that tension has eased in regards to the trade dispute between the United States and China.
It’s not about nuance, it’s not about the subtleties of trading, rather it’s about a 24-hour market in which traders witness polar opposites in terms of market direction and sentiment.
Market participants witnessed or were part of a 180° reversal of market sentiment this morning with equities moving substantially higher, and safe-haven assets such as gold trading lower.
According to the Oxford dictionary, a trade war is “a situation in which countries try to damage each other's trade, typically by the imposition of tariffs or quota restrictions.”
The first quarter of 2018 concluded today, and as far as gold pricing goes, this marks the third consecutive quarter of positive price gains. However, first-quarter gains were the smallest gains for any quarter over the last seven years. Gains this quarter were a tepid 1.8% with gold moving from $1300 to close today at $1325.
Now for the second day in a row, gold continues to trade under pressure. Although yesterday’s price action contained a higher high then Monday, gold fell under pressure to close $11 lower on the day. Dollar strength and selling pressure not only continued but also accelerated today with gold losing 1.38% of value.
Gold is trading under pressure today, resulting in a $10 decline. As of 4:00 PM Eastern standard time, gold futures (April futures contract) are currently off by $11.10 (-0.82%).
After dropping over 1100 points on Thursday and Friday of last week, the Dow Jones Industrial Average has staged a dynamic recovery today. As of 3:30 PM Eastern standard time, it is trading 622 points higher at 24,155. This recovery is the result of an easing of tensions regarding the possibility that there will be a trade war between China and the United States.
This week was certainly ripe with major events, each of which has had a direct and immediate impact on gold. However, it was the escalation of trade tariffs proposed by President Trump this week that sent gold prices dramatically higher and equity pricing to its lowest level since November 2017.
A combination of factors, which have had a profound impact on the U.S. equities markets, have resulted in U.S. equities trading dramatically lower and moving into corrective territory. These factors have also created bullish tailwinds for gold prices.
