Taking markets by surprise today, Donald Trump announced that he will be imposing new tariffs on goods imported from Mexico. This in addition to his earlier actions in which he raised tariffs; on certain items that the United States imports out of China from 10% to 25%.
This action today, coupled with higher tariffs announced earlier this month has certainly rattled the markets. The repercussions of this announcement have sent shockwaves across a wide spectrum of financial markets.
With the oversea equities markets already closed for the weekend we could see a tremendous cascading effect in global equities when they open for trading next week.
As far as metals are concerned, of 3:55 PM EDT, gold futures basis the most active August contract are still surging to higher ground, currently up $18.70 (+1.44%), and fixed at $1311. For the first time since April 10, 2019, gold futures have traded above $1310. Most impressive is the fact that gold has had largest percentage gain in the precious metals complex today. In fact, silver is only 0.48% higher on the day, and both platinum as well as palladium are trading lower.
Today’s price surge in gold is the result of both dollar weakness which accounts for 0.40%, with the remaining 1.08% directly attributable to traders buying the precious yellow metal higher. Once again, we see gold being the favored safe haven asset in times of economic turmoil.
Gold Moves Close to Parity with Palladium
In the case of palladium, it is currently trading lower, down by 3.35% today and fixed at $1320 per ounce, which is just $10 above the current price of gold. Today’s decline in palladium now challenges its title as the most expensive precious metal, with gold most likely to move back to parity and then, once again, take its proper position as the most expensive precious metal.
US Equities Plummet
Currently the Dow Jones industrial average is trading at 24,008 37.99 which is a decline of over 332 points (-1.34%). With under an hour left in trading it will be interesting to see whether this selling pressure increases, or decrease, as traders and market participants continue to react to this news. This new action by the administration has affected US equities across all major indices with the Standard & Poor’s currently down 1.28%, and is fixed at 2753.45. Lastly the tech heavy NASDAQ composite is experiencing the largest percentage drawdown on the day currently down 1.49%, and fixed at 7454.87
Donald Trump has once again shocked the financial world with his most recent declaration of imposing tariffs on one of our most important allies and trading partners Mexico. It seems there is a loud bravado in his voice when he talks about the billions of dollars filling the coffers of the US treasury. While he will never feel the financial hardships that he is placing on many US citizens, he is free to focus on the increased capital being collected by our government, a luxury the majority of Americans do not have.
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Wishing you, as always, good trading,