Gold rediscovered as safe haven amid trade conflict

Market report Michael Blumenroth – 17.05.2019

Weekly market report

This week, markets continue to be dominated by the trade conflict between the US and China. It further escalated after the US President threatened, via Twitter, to raise tariffs on roughly US$300 billion worth of Chinese goods imported to the US to 25 per cent. China promptly fired back and imposed tariffs on US exports, which will apply from 1 June.

Turbulent markets, stable euro/US dollar exchange rate

The impact of the current trade dispute on the global economy became clear on Wednesday morning, when data on industrial production, retail sales and Chinese construction and manufacturing spending in April remained well below expectations. Traders, especially on the stock markets, reacted with caution and yields/market interest rates for government bonds with good credit ratings significantly declined. Surprisingly, and despite movements in other markets, the euro/US dollar exchange rate remained largely unperturbed and hovered around the 1.12 €/US$ mark.

Gold in US dollars rises

Gold traded at 1,285 US$/ounce on Friday morning last week. Following  further tariff threats from Donald Trump and counter-tariffs from China, the precious metal jumped above the 1,300 mark to 1,303 US$/ounce on Monday evening. The US President did, however, follow up by sending somewhat more conciliatory messages to China, probably in reaction to Monday’s weak stock markets.

Furthermore, he postponed the decision on auto tariffs against EU member states by up to six months. This led to a somewhat more optimistic mood on the markets. Stock markets gained traction, safe havens somewhat declined. Gold accordingly receded to 1,284.50 $/ounce yesterday (Thursday) and traded around 1,288 $/ounce this morning.

Xetra-Gold also sees slight weekly profit

The price of Xetra-Gold rose over the course of the week. From 36.80 €/gram last Friday morning, it had climbed to 37.30 €/gram by Wednesday, and receded yesterday to its current 37.05 €/gram.
The trade conflict is likely remain at the centre of attention next week.

I wish all readers a relaxing weekend.

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