Trade war looms?
On March 22, US president Trump signed a memorandum that could impose tariffs on $60 billion of imports from China. These tariffs could, however, come after a 30-day consultation period that starts once the list is published. The markets were already fearing this move.
Retaliatory measures to negatively impact economies
China has been quite vocal in telling the United States that it would counteract tariffs on US imports. After the US government’s latest move, China urged the United States to “pull back from the brink.” The start of a trade war would be detrimental to both economies. Other countries are also closely monitoring the situation between these two countries, and they might also think about retaliating.
On March 22, Trump watered down steel and aluminum import tariffs by exempting more countries from the tariffs, but the situation is still far from clear.
Gold finds support on trade war fears
This outlook could breed uncertainty about the global growth path. Also, the US dollar could weaken further as the US economy’s prospects take a hit. Both of these propositions are positive for gold.
After the latest measures initiated by the United States, stocks and the US dollar took a plunge. Gold prices hit an intra-day high of $1,343.1 per ounce after these announcements—the highest level since February 20.
Increasing economic uncertainty could lead to further appreciation in gold prices, which would benefit miners leveraged to gold prices such as Randgold Resources (GOLD), Harmony Gold (HMY), Eldorado Gold (EGO), and Alacer Gold (ASR). These stocks constitute 10.5% of the VanEck Vectors Gold Miners ETF (GDX).