The price of gold flew past the $3200-mark last week as the trade war between China and the U.S. triggered fears of recession and the dollar’s value dropped against its peers. The trade war began when President Trump introduced reciprocal tariffs at the start of this month, a decision he claimed would protect jobs and boost domestic manufacturing while also encouraging U.S. consumers to purchase more American-made goods.
The tariffs affected over 50 countries, with some introducing retaliatory levies in response. Among them was China, which introduced an 84% levy on American goods after the Trump Administration applied a 125% tariff on it. A few days later Beijing responded by raising its tariffs on American imports to 125%.
These announcements have led to considerable volatility on global stock markets and could explain why over the last week, bullion’s price has risen by more than 6%, with spot gold also reaching $3235.89 per ounce. Additionally, U.S. gold futures increased by over 2% to reach $3244.60.
One commodities strategist at WisdomTree, Nitesh Shah, explained that as faith in America as a reliable trade partner continues to reduce and the dollar depreciates, many are turning to gold as a safe haven asset.
Central bank purchases, increases in investor flows into ETFs backed by gold, the reduced rate expectations announced by the Federal Reserve, and geopolitical instabilities are also fueling the precious metal’s rally.
Figures show that last month’s producer prices in America dropped by 0.4%, with experts expecting tariffs on imports to elevate inflation in the next few months. Traders also expect the Federal Reserve to continue reducing interest rates come June.
One independent metals trader, Tai Wong, argues that the producer price index and consumer price index will give the Federal Reserve more room to reduce rates. This, Wong notes, will in turn allow it to continue applying downward pressure on the greenback.
An environment with low interest rates will allow non-yielding gold to thrive, with more investors turning to it as a hedge against inflation and other uncertainties.
UBS analysts note though that a considerable improvement in America’s fiscal and macro backdrop, an improvement in current trade relations, and easing geopolitical tensions may affect gold’s positive performance though.
Palladium and spot silver have also recorded increases in their prices, with the former reaching $914.87 and the latter’s price hitting $32.18 per ounce. On the other hand, platinum has recorded a 0.2% drop in its price, reaching $936.36.
The rising price of gold is likely to draw more investor interest towards companies like GEMXX Corp. (OTC: GEMZ) that are involved in the entire value chain of gold from extraction to the making of consumer goods like jewelry.
NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ
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