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Gold Bullion Bulletin – 24 May

Welcome to our weekly gold bulletin – we’ll round up all of the latest investment news and pertinent updates from global markets here each Friday so you never miss a breaking news story or expert comment. Read on for this week’s recap.

Stocks take a tumble after more Chinese companies are blacklisted placing gold in hot demand

The stock market showed further worrying signs of instability this week as the U.S. and China continue to be locked in an ongoing trade war following President Trump’s move to raise the tariffs on $200 billion of Chinese imports from 10% to 25%. China later retaliated by announcing new tariffs on $60 billion of American exports shaking the stock market and causing shared to plunge earlier this month – a trend we are now seeing repeating itself with additional losses Wednesday. This latest round of renewed tensions hit boiling point on Wednesday when news broke that the U.S was considering blacklisting a further five Chinese companies, including Hangzhou Hikvision Digital Technology Co. and Zhejiang Dahua Technology. This move widens the dragnet beyond the embattled Huawei to include world leaders in video surveillance. Should these tech companies be black listed, they will effectively be barred them from using U.S. components or software in their products. It’s a move that is being seen by many as an attempt to further pressure China to make some trade concessions. Many financial experts have warned that such action will only seek to exacerbate the current trade war between the U.S and China, with stocks paying the ultimate price. Co-inciding with this latest in a long running line of international disputes was the release of minutes from a Federal Reserve meeting earlier this month. Respected journalist Rob Lenihan, who writes for outlets like The Street and CNN reports that the minutes show, “The Federal Open Market Committee opted not to change the central bank’s benchmark interest rate at the meeting, citing a lack of inflation pressure.” He quotes Mike Loewengart, vice president of investment strategy at E*Trade as noting that there won’t be rate cuts any time soon. Against all this political and economic wrangling, Lenihan reports “The Dow Jones Industrial Average fell 101 points, or 0.39%, to 25,777, the S&P 500 fell 0.28%, and the tech-heavy Nasdaq declined 0.45%.” With President Trump and Chinese President Xi Jinping unlikely to meet before the end of June, it seems that the market volatility and Wall Street dips are set to stay for at least several more weeks. For those keen to reduce their exposure to risk, this is as good an indication as any that gold is a more stable, safer bet in the face of escalating tensions.

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Gold prices set to boom in face of trade tensions

A precious metals strategist says the current lower price of gold isn’t likely to last as she stands by her outlook for a $1,400 average. UBS’ Joni Tevis says that her analysts predict that an all out trade war with higher tariffs between the US and China would result in a 45bp drag to global growth. While the markets have been on a roller coaster ride as the spat has played out, she says more could still be to come remarking that the US dollar’s resilience is likely to be unsustainable in the longer term. She noted, “The dollar’s upside potential should be limited, given expensive valuations and crowded positioning. Lower real rates and equity weakness on the back of trade-related growth concerns should be supportive for gold.” We know that the US and China won’t sit down for face-to-face talks until the end of next month when things could potentially come to a head. For those who do see gold as a safe haven and want to be prepared for what seems to be an inevitable global slow down there is just a matter of weeks left to take advantage of the lower price of gold.

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Gold emerging as safe haven as political and economic uncertainty abounds

Gold stepped into the spotlight as a safe haven this week as a perfect storm of political and economic uncertainty swarmed – a storm which is casting its net far and wide across the US and Europe and looks not to be abating any time soon.

As we have already seen, the US – China fighting has seen shares dip and markets display increased signs of instability while in Europe Brexit continues to be a big issue, elections could be looming in the UK and a new PM needs to be found. Senior Market Analysis Jim Wyckoff says this creates perfect conditions for gold as a safe haven, explaining “ Gold prices are posting good gains and are near their session highs in midday U.S. trading Thursday. Slumping world stock markets and crude oil prices today have put a safe-haven bid into the gold market. Renewed worries about a prolonged U.S.-China trade war following new harsh rhetoric coming out of China are featured today. However, traders and investors are also eyeing parliamentary elections in the U.K. and The Netherlands … The U.K. Brexit issue … continues to weigh on the British pound. A big drop in oil prices of around $5.00 a barrel the past two days has also helped to boost the safe-haven that is Gold.”

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