Even though gold only gained fractionally on the day, it is showing some signs that it is acting once again as a safe haven asset. As of 4:12 PM Eastern standard time gold futures are currently trading up $1.90, and basis the most active June contract are fixed at $1285.70.
These gains have occurred as the other precious metals have traded lower on the day. Silver, platinum and palladium collectively have been pressured by plummeting U.S. equities markets as their industrial component comes into play. Today investors reacted to the current trade war between the United States and China, and their concerns deepened about Trump ratcheting up tariffs on Chinese imports from 10% to 25% on Friday. The fact that gold showed gains on a day in which the other precious metals traded lower along with equities clearly indicates that there was some safe haven buying.
At its low the Dow Jones industrial average was down well over 600 points. Although the Dow closed off of these lows it still lost 1.79%, which converts to a 473 point decline, taking the broad-based index to 25,965.09.
According to Bloomberg, “U.S. equities fell by the most since March as investors remained on edge over President Donald Trump’s threat to increase tariffs on billions of dollars of imports from China. Oil dropped and the yen strengthened.”
According to Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, “Investor complacency finally caught up with the market as a smooth ride to a trade agreement was all but priced in prior to this week. “Unfortunately, real life isn’t as simple as that and we’re running into issues as we get closer to the end of trade negotiations.”
China said that it has told the U.S. that it will not change its laws for a trade deal. That being said, the United States and China will resume their trade negotiations on Thursday and Friday when China’s top trade negotiator will visit Washington.
If in fact no agreement is reached by Friday higher tariffs to the tune of 25% will be implemented. This will certainly hit the pocketbooks of individuals as well as corporations as they pay more for Chinese imports. While these tariffs will increase the coffers of the U.S. Treasury, they will certainly put President Trump under pressure to resolve the trade dispute.
Wishing you, as always, good trading,