Tariffs, Trade Wars and the U.S. Dollar
Renewedconcerns about a potential trade war as a direct result of proposed tariffs onsteel and aluminum has resulted in both a lower U.S. dollar as well as buyersaccumulating gold. Gold futures are currently trading up $15.50 at $1335.40.
Lastweek President Donald Trump proposed the implementation of steel and aluminumtariffs. This proposal has met with global and internal resistance. Nonetheless, President Trump remains steadfastin his desire to initiate these tariffs.
Pushbackon President Trump’s proposed tariffs internally are coming from bothRepublican lawmakers as well as his administration. This pressure is an attemptto limit tariffs with benchmarks andquotas.
Accordingto Bloomberg Politics, “Republicans in Congress areundertaking an unusual public campaign tothwart broad tariffs of 25 percent on importedsteel and 10 percent on aluminum. House Speaker Paul Ryan on Tuesdayurged the president to ‘be more surgical’ in penalizing trade abuses to prevent‘any kind of unintended consequences orcollateral damage.’”
Globalpressure and threats of retaliation are also emerging from global partners. Awarning issued by the European Union today stated that it would respond withits own 25% tariff to hit 3.5 billion of U.S. goods. This would include targeting U.S. brands ranging from consumer,agricultural, and steel products.
According to a list drawn up by the European Commission, obtained by Bloombergnews, targeted U.S. goods include motorcycles, jeans, and bourbon whiskey. This sends a strong message to Washingtonunderlining the potential economic costs if President Trump moves forward withhis tariff proposal.
Theserenewed concerns have put pressure on the U.S. dollar which is currentlytrading down by over a half a percent (-0.47 points) at 89.57. Tariff fears have also prompted money flow into gold as a safe-haven asset, bidding up the preciousyellow metal by about $15 today.
As of 4:00 PM Eastern standard time, spot gold is trading up $14 on theday and currently fixed at $1330.80. On closer inspection,according to the Kitco Gold Index, $8.20 of today’s move is directlyattributable to buying, with the remaining $5.80 a result of the weakening U.S.dollar.
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Wishingyou as always, good trading,
By Gary WagnerContributing tokitco.com
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gary@thegoldforecast.comwww.thegoldforecast.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.