Last week the dollar and trade war served as headwinds for gold prices. A stronger greenback made the yellow metal more expensive for foreign investors, while the escalating trade war fueled investor fears of declining demand for industrial metals. However, these very same market forces will soon prove tailwinds for the precious metal as the strong dollar triggers a global debt crisis and the trade war an economic downturn.
Market fundamentals like dollar strength and geo-economic risk are important considerations for gold investors. Learn more about the forces that have traditionally moved gold prices in “How These 10 Factors Regularly Influence Gold Prices.”
Gold Price Movement Indicators:
Monday, July 9, 2018
The yellow metal hit a two-week high of $1,265.87 as the dollar retreated from its recent gains. Although the ICE U.S. Dollar Index was up .2 percent on Monday, it was down for the month by 5 percent. Financial analysts have cited the dollar as one of the major gold price movers in recent weeks. ‘All will depend on the U.S. dollar for gold… [and] more negative news from the U.S. trade war should be bullish for gold,’ said the chief market analyst at Insignia Consultants, Chintan Karnani, on Monday.
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Gold and other dollar-denominated assets are less expensive for foreign investors when the greenback takes a tumble. With the euro climbing to a session high following an announcement by the European Central Bank that it would tighten monetary policy by the end of the year, investors on the continent likely took advantage of opportunities to buy gold and silver at bargain prices.
Tuesday, July 10, 2018
After falling to its lowest level since mid-June on Monday, the dollar index advanced .33 percent to 94.386 on Tuesday. Dollar-priced spot gold pulled back by .2 percent to $1,255.09 an ounce. ‘Strong stocks, overseas buyers need dollars to pay for stocks, so gold again becomes expensive,’ asserted the managing director of RBC Wealth Management George Gero.
In the dual between the dollar and gold, the dollar may have won on Tuesday, but the long-term impact of the Fed’s tightening monetary policy and strengthening of the U.S. dollar could be a debt crisis in emerging markets, one that could domino into a global economic downturn when the predicted recession hits.
Wednesday, July 11, 2019
Rising Geo-Economic Risk
Global-economic risk escalated on two fronts on Wednesday. During a meeting of the North Atlantic Treaty Organization (NATO), President Trump accused Germany of “being ‘totally controlled by’ and ‘a captive of Russia.’” Instead of supporting the perception of a united front between the U.S. and Canada and Europe, the president “reignited concerns about [his] commitment to the NATO alliance.”
Meanwhile, threats from the White House on Tuesday to levy a 10 percent tariff on an additional $200 billion worth of Chinese goods fueled a commodities selloff on Wednesday. The intensifying trade conflict sent investors into risk-off mode over fears of the consequences for the economy and demand for industrial metals. Stocks and commodities fell. ‘The escalation in the U.S.-China trade dispute put a sizable dent into all of the metal commodity prices overnight. Gold is getting pulled down with the broader sell off in copper and zinc,’ explained the executive president at GoldMining Inc. Gold prices pulled back from a high of $1,252.30 at 4 am to a low of $1,240.70 at 9 pm.
If the geo-economic situation continues to worsen, demand for gold as a safe haven will return. Long-term investors who buy gold and silver now will avoid paying a premium when the global economic crisis hits.
Thursday, July 12, 2018
Gold seized back its safe haven status on Thursday as the escalating trade war stoked investor fears of a consequent global economic crisis. ‘We know for certain that Trump is serious with respect to trade tariffs on China. Once again, the counter reaction from China is expected and that itself would have tendency to escalate the tensions further. So maybe stay bullish on gold for a little longer,’ advised Naseem Aslan, the chief market analyst for ThinkMarkets.com.
Gold prices increased despite dollar strength, rising to a high of $1,246.90 at noon and from 5 pm to 6 pm following a low of $1,242.40 at 2 am and 7 am.
Friday, July 13, 2018
The dollar took back the safe haven reins on Friday, ascending to a two-week high against a basket of currencies. Two reports were behind the greenback’s strong performance: one indicated that strong exports from China to the U.S. supported a record-high trade surplus. Trade-war panicked investors flocked to the greenback for safety. The Fed’s semi-annual report to Congress was the second. It confirmed the central bank’s plan to continue to increase rates gradually due to ‘solid’ economic growth in the first two quarters.
Prices for spot gold pulled back .5 percent to $1,240.90 at 1:34 pm as the yellow metal became more expensive for foreign investors.