Trump’s Tariffs and Looming Trade War Pressures Equities & Lifts Gold Prices

March 22, 2018 - 6:25pm

 by Gary Wagner

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.

As of 4:00 PM Eastern standard time, gold futures are trading up $7.50 on the day at $1,330 per ounce. Higher gold prices have moved in tandem with a shift in market sentiment as traders and investors liquidated equities.

The Dow Jones Industrial Average lost almost 3% in trading today, closing at 23,959 points, which is a net decline of 723 points on the day. The NASDAQ composite is down about 170 points at 7,176, a net decline of 2.28%.

Trade war fears are being cited as the primary underlying cause of today’s brutal price decline. According to Bloomberg Markets, “U.S. stocks tumbled the most in six weeks, and Treasuries rallied as investors shifted focus from the Federal Reserve to the threat of an escalating trade war with China that has the potential to disrupt global growth.

President Donald Trump took his boldest step to level the economic playing field with China, ordering sweeping tariffs on Chinese goods in a move that could escalate already tense trade relations between the world’s two biggest economies.”

Releasing a Fact Sheet today, President Trump upped the ante by adding direct penalties in response to China’s acts, policies, and practices involving the unfair and harmful acquisition of U.S. technology, as well as practices related to the transfer of this intellectual property.

According to the Presidential fact sheet released today, the USTR will publish a proposed list of products subject to additional tariffs within 15 days.

While signing today’s tariff orders, President Trump told reporters, “This is the first of many.”

China responded immediately in a statement issued by the Chinese Ambassador to the United States. Cui Tiankai had this to say, “We don’t want a trade war, but we are not afraid of it. If somebody tries to impose a trade war on us, we will certainly fight back and retaliate. If people want to play tough, we will play tough with them and see who will last longer.”

It is quite apparent that actions by the current administration, as well as response to these actions by the Chinese, could lead these two countries down a road that leads to one outcome: a trade war.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

This morning we sent out a Trade alert to: Buy April gold @ Market (1330 current)

Place stop @ 1314.30

Maintain long gold @ $1329 and Stop @ 1314.30

Gold Market Forecast

investors shifted focus and market sentiment from the Federal Reserve to the threat of an escalating trade war with China that has the potential to disrupt global growth. This could certainly change the former Risk-on Sentiment in favor of the Safe-Haven Asset class such as gold.