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Gold Spikes as US-China Trade Dispute Hits Into High Gear

August 23, 2019 at 17:33 by Andrew Moran

Gold futures are rallying at the end of the trading week, driven by another escalation in the US-China trade dispute. The yellow metal received a boost following Federal Reserve Chair Jerome Powell’s speech, promising that the central bank will act to sustain the economic expansion. Gold is already up 8% on the month and trading at its best level in several years, so can it maintain its bull run?

December gold futures surged $27.30, or 1.81%, to $1,535.80 per ounce at 16:59 GMT on Friday on the Comex division of the New York Mercantile Exchange. The yellow metal is on track for a healthy weekly gain of 0.8%. Year-to-date, gold prices have advanced 20%.

Silver, the sister commodity to gold, is also soaring to finish off the trading week. September silver futures rose $0.345, or 2.02%, to $17.385 per ounce. The white metal is poised for a remarkable gain of 1.8% this week, lifting its 2019 increase to 12%.

On Friday morning, it was reported that China would be slapping 5% and 10% tariffs on $75 billion in US goods, including agriculture, crude oil, automobiles, and small aircraft. These levies are scheduled to go into effect on September 1 and December 15. Some had anticipated Beijing would refrain from retaliating because Washington had postponed planned tariffs by more than two months.

In a series of tweets, President Donald Trump “ordered” US companies to search for an “alternative to China.” Global financial markets panicked as the Dow Jones plummeted nearly 500 points and the Nasdaq shed about 200 points. The Volatility Index skyrocketed 23.8%.

He also asked:

My only question is, who is our bigger enemy, Jay Powell or Chairman Xi.

The Fed Chair said in a speech that the central bank would be prepared to employ a series of accommodative stimulus measures in order to sustain economic growth.

Speaking in Jackson Hole, Powell remarked:

Our challenge now is to do what monetary policy can do to sustain the expansion so that the benefits of the strong jobs market extend to more of those still left behind, and so that inflation is centered firmly around 2%.

While monetary policy is a powerful tool that works to support consumer spending, business investment, and public confidence, it cannot provide a settled rulebook for international trade. We can, however, try to look through what may be passing events, focus on how trade developments are affecting the outlook, and adjust policy to promote our objectives.

In the end, according to Powell, the Eccles Building will examine monetary policy tools it employed during calm times and in a crisis: “We are asking whether we should expand our toolkit.”

The Federal Open Market Committee (FOMC) is widely expected to cut interest rates for a second time at its September meeting.

Gold further propelled on a weaker US dollar as the greenback slumped 0.46% to 97.72, from an opening of 98.19.

In other metal commodities, September copper futures dipped $0.03, or 1.15%, to $2.52 per pound. September platinum futures fell $6.00, or 0.7%, to $855.90 per ounce. September palladium futures fell $31.40, or 2.11%, to $1,453.80 an ounce.

If you have any questions and comments on the commodities today, use the form below to reply.

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