Weekly Round-Up: Gold Price Up on Trade War Fears

Gold prices gained as much as 1 percent on Friday (March 23) as investors sought safety after US President Donald Trump moved towards long-promised anti-China tariffs.

“Uncertainties around a possible trade war between the United States and China are driving some safe-haven buying,” said Hareesh V, head of commodity research, Geojit Financial Services.

Gold also found itself in an upward motion due to a weaker dollar after the Federal Reserve announced the first interest hike of 2018 on Wednesday (March 21).

Despite declines leading up to the Fed’s announcement, the price of gold rose 1.12 percent, reaching US$1,326.80 shortly after the hike was announced.

According to Federal Reserve officials, they continue to project a total of only three increases this year. However, they forecast a steeper path of hikes in 2019 and 2020, citing an improving economic outlook.

“The guidance in terms of the future rate hikes is a touch more hawkish than originally expected. 2019 looks like we’re going to get a faster pace of rate hikes,” said Matt Miskin, market strategist at John Hancock Investments.

A trend of the dollar sinking following an interest rate hike has materialized, which is good news for gold and its appeal within the market. Investors will also be intrigued by the Fed’s expectations on inflation, where gold typically acts as a hedge.

As of 9:50 a.m. EST on Friday, gold was up 1.31 percent, and was trading at US$1,346.90 per ounce.

For its part, silver was also down prior to the interest hike, declining 0.8 percent on Tuesday (March 20). Silver eventually reached US$16.56 per ounce after the hike was made official.

According to Jim Wyckoff of Kitco,“[i]n this case, the selling pressure in gold and silver occurred because traders reckoned a US rate hike would be bearish for the metals. And when the rate hike actually occurred, the metals moved higher because the sellers were already exhausted and had played out their rate-hike hand.”

Despite silver’s ability to rally after the Fed’s announcement, the precious metal  dipped the following day but rebounded on Friday.

As of 10:25 a.m. EST, silver was up 0.83 percent, sitting at US$16.57 per ounce.

Rounding out the week in metals is copper, which was flat for most of the week but faced a decline in the days after the Fed announced the interest hike. As of 10:38 a.m. EST copperwas down 3.32 percent, trading at US$3.09 per pound.

Meanwhile, oil prices rose on Friday when the Saudi energy minister said OPEC would need to keep coordinating supply cuts with non-member countries into 2019.

Oil’s rise defied a slump in global stock markets, which fell in response to worries about a trade stand-off between the United States and China.

“There are sufficient reasons to expect oil prices to strengthen further from here, and we stick with our (Brent) $75 per barrel call for Q3,” Morgan Stanley said.

As of Friday at 11:05 a.m. EST, oil was up 0.73 percent, trading at US$65.32 per barrel.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.