Trade Talks and Trade Tariffs

September 12, 2018 - 5:46pm

 by Gary Wagner

Last week it was all about the potential that President Trump would implement more tariffs on Chinese imports which moved the dollar higher and continued to put pressure on gold prices. Today it is all about talks which have the potential to resolve the current trade dispute between the United States and China. Reports surfaced today that the United States has proposed that the two superpowers return to the table and continue their trade talks, in attempts to come to a long-lasting trade agreement and avert an all and out trade war. The Wall Street Journal reported that the U.S. is proposing a new round of trade talks with China. These discussions are aimed at giving China another opportunity to resolve the trade conflicts before new U.S. tariffs are imposed.

“’The Trump administration is reaching out to China for a new high-level round of trade talks, in an effort to give Beijing another opportunity to address U.S. concerns before it imposes new tariffs on Chinese imports,’ said people briefed on the matter. Senior U.S. officials, led by Treasury Secretary Steven Mnuchin, this week sent an invitation to Chinese counterparts headed by Vice Premier Liu He, proposing another meeting to talk about bilateral trade, the people said.”

These reports resulted in U.S. dollar weakness, the opposite of recent activity which has taken the dollar higher. The dollar index is currently fixed at 94.81, with a net loss -0.415 points (-0.44%) today. As reported in MarketWatch, Tyler Ritchey, coeditor of the Sevens Report said, “Metals trading has been all about the trade relationship between the U.S. and China recently, as the dollar continues to move inversely with sentiment towards a trade war, and the dollar has been the main safe haven for trade fears.”

Today’s dollar weakness has been an essential component of today’s respectable rise in gold prices. Dollar strength has contributed approximately 34% to today’s move in gold. As of 4:30 PM Eastern standard time, spot gold is currently fixed at $1,206.20 which is a net gain of $8.10 on the day. The majority of today’s upside move was due to investors and traders bidding up the precious yellow metal (+$4.60), accounting for the remaining gains in gold prices today.

Gold futures are currently trading up $9.40, with the most active December Comex contract fixed at $1,211.60. Gains in the futures markets are believed to be a result of dollar weakness, short covering, and “bargain basement buying.”

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

On Tuesday, August 4, we sent out a Trade Alert: Sell December gold @ the Market (current $1199.5)
Maintain Short December Gold @ $1199.40. Maintain Stop @ $1218.13 

Gold Market Forecast

Yesterday I said that as long as the trade dispute threatens to get worse before getting better...except lower prices for gold. Without these fundamental factors changing, do not expect a change in the downward bias in gold and silver. The Wall Street Journal reported that the U.S. is proposing a new round of trade talks with China. If talks result in a resolution we would see gold prices rally, however if the talks do not make progress look for the dollar to rally and gold to sell off.