Daily Management Review

Trade conflict aggravation brings back interest in gold


Gold prices are returning to a six-year high. At the end of last week, they reached the level of $ 1,529.81 per troy ounce. Another round of the trade war between Washington and Beijing on the introduction of import duties forced investors to increase investment in defensive assets. The inconsistent situation with Brexit, which is fraught with consequences for the economies of European countries, as well as Iran’s allusions to unsafe oil traffic in the Persian Gulf, are also fueling interest in the precious metal. This is why analysts do not consider the level of $ 1,600 per ounce excessive.

According to Bloomberg, during the auction on August 23, gold quotes reached $ 1,529.81 per troy ounce. Thus, they returned to their maximum values since March 2013. Since then, only on one day, August 15, 2019, gold quotes rose above this mark and reached $ 1535.11 per ounce. At the close of trading on the spot market on Friday, the gold price was 1,526.96 per ounce, which is 1.93% higher than Thursday's close. Gold has been steadily rising in price since the beginning of June this year, when relations between the United States and China worsened. Since that time, the price of the precious metal has grown by almost 20%.

At the end of last week, relations between the largest economies in the world escalated even more. On August 23, the Chinese Ministry of Finance announced an increase in duties on US goods totaling $ 75 billion from September 1 and December 15. Thus, the Chinese department reacted to plans by the US administration to introduce a 10% duty on Chinese imports by $ 300 billion from September 1. The reaction of US President Donald Trump didn’t took long to come, and it was announced that from September 1, duties would be increased not by 10%, but by 15%. In addition, duties on another group of goods worth $ 250 billion from October 1 will amount to not 25%, but 30%. At the same time on Sunday, White House spokeswoman Stephanie Grisham said that the US president regrets that he did not raise duties on goods from China even higher. The next escalation of the trade conflict between the United States and China, which is already exerting strong pressure on world markets, received a new turn, which caused the rise in gold prices.

It supports gold prices and geopolitical uncertainty in various regions of the world. In particular, Bloomberg reported citing an official French source that Britain’s uncoordinated exit from the EU is seen as the main scenario.

source: bloomberg.com