The world has been witnessing the trade spat between the U.S. and China since the beginning of this year. Despite the troubles, the war has turned beneficial for gold buyers. The U.S. dollar saw an 11-month high and on the other hand, gold witnessed six-month low owing to the US-China trade war. Moreover, the 2018’s lowest price of gold is an effect of the high price of the dollar, and the Federal Reserve’s current monetary policy of quantitative normalization in trading of gold.
U.S. And China Trade War
The ongoing dispute between China and the U.S. has affected the net worth of the dollar and if the situation prolongs any further, it will result in the fall of gold prices. The important question is whether this trade agenda is one of the negotiation tricks of the U.S. President Trump or an all-out war against China to undermine its economy?
Trump’s unpredictable decisions have resulted in investors betting on the dollar instead of gold, which in turned reduced the gold prices by 3.5 percent in June. As reported in Financial Express, the current trade dispute and tariffs on both countries show that the trade policies of both sides contain more friction than ever, and the countries need to resolve their issues as soon as possible.
It is not a secret that Trump has the most changeable mind, and if this spat gets any worse, people can expect him to make a U-turn. Therefore, investors are still betting on the dollar for the time-being but believe in Trump to change the market situations. However, the worse situation will be somewhat positive for gold if the likely adverse effect on global growth and increased uncertainty in the world is ignored. If the world continues its state of instability with respect to both global economy as well as geopolitics, gold will be an essential portfolio diversification tool and help to reduce overall portfolio risk.[The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views and/or the official policy of the website. ]