Gold prices have stayed below the $1,300 price range for a while now, reaching a one-month high yesterday as China-U.S. trade tensions reached a new high point. Tuesday was a different story as worries partially abated and indexes recovered some of their losses from the previous trading session. Gold, in particular, gave up a little bit, dipping slightly lower as the overall bearishness of Monday faded.
Gold futures for June delivery lost $5.5, or 0.4 percent, and ended the day at $1,296.30 per ounce. Spot gold hovered around the same mark, settling at $1,296.56 per ounce. Gold broke the $1,300 level on Monday as China announced they were imposing higher tariffs in retaliation on a range of U.S. goods such as natural gas, frozen vegetables, and more. Currently, both countries have up to 25 percent tariffs on each others’ products as the U.S. targets around $500 billion worth of Chinese goods and the Chinese targeting around $60 billion of American goods.
Mike McGlone, a senior commodities strategist at Bloomberg Intelligence, went on to say that a gold rally is still “just a matter of time” as fundamentals point to an increase in the coming months. “The key thing I’m watching for is the trade-weighted broad dollar’s peak near its 16-year high, and last year we had the VIX volatility index on an annualized basis bottom. That process should continue and that puts gold in a pretty strong trajectory higher,” McGlone said in an interview Kitco News. “The significance is since the latest round of Trump tariffs with China, the Chinese Yuan is down 2 percent, so that’s kind of a significant driver for gold and commodities and it’s putting pressure on gold.”
Markets will likely remain in a sort of limbo in the upcoming weeks as the two nations posture with one another. While tariffs hikes are possible, it’s more likely that talks will resume and a conclusion of some sort will emerge. Regardless, the positive market sentiment built up in Q1 2019 as stocks rallied is being undermined, and safe havens such as gold will likely to benefit.
Other precious metals, such as silver, have also fallen a little. July silver futures contracts fell just by 1.3 cents, or 0.1 percent, and ended the day at $14.777 an ounce and registered a weekly loss of 1.3 percent last week. July platinum contracts fell by a larger amount, dipping 1.2 percent down to $854.90 per ounce. While currently there is a fair amount of reserves above ground, many expect that platinum will end up seeing a supply crunch in the months and years to come. While as a precious metal, platinum to an extent will follow gold and silver in their price movements, it also is similar to its sister metal palladium, as both are used in catalytic converters in the auto sector.
Back in February gold reached a one year high as prices went up to the $1,340s. Since then, prices have been steadily going downwards, dashing the hopes of many investors who predicted gold could reach $1,400 and even $1,500 in 2019. The last time gold returned to the $1,300s was in early April.