DMR–Gold unmoved by trade war escalation

DAILY MARKET REPORT

Gold had a muted reaction to today’s trade war escalation with the price going sideways. The U.S./China trade war thus far has had a negative effect on commodities across the board including gold, so holding its own and not retreating further comes as something of a surprise. Alibaba’s Jack Ma came out over the weekend predicting a protracted struggle that could last twenty years.  Thus far, the reaction in the West to the trade conflict has been subdued.  That sentiment, however, could change as the trade war moves from peripheral concern to immediate reality.  In China, the trade wars have done little to put a damper on gold imports.  It is on track this year to import another 2000+ metric tonnes of the metal – two-thirds of the annual global mine production.

Quote of the Day
“Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war. We can also say that if … things go badly, it would seem that gold (more than other safe haven assets like the dollar, yen, and treasuries) would benefit.” – Ray Dalio, Bridgewater Securities

Chart of the Day


Chart courtesy of HowMuch.net

Chart note:  “One thing is immediately clear, ” says HowMuch. “Imports and exports are both on an upward trajectory year over year, but imports tend to grow faster. In other words, when looking at the graph you will notice the gap between the two numbers has gotten larger and larger while the space between the two circles has also become darker and darker. In short, the trade deficit used to be relatively small, averaging less than $150B year over year in the 1990s, but then it exploded in the 2000s. The single biggest increase occurred in 2004 when it jumped from $532B to $655B—a whopping $122B in one year.”

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