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US-China Tensions Slowly Settle: How Has Gold Been Affected?

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May. 22 2018, Updated 12:17 p.m. ET

US-China trade wars

Gold prices dropped to a five-month low of $1,281.80 and closed at $1,283.30 per ounce yesterday, recording a one-day loss of 0.6% and a one-month loss of 3.3%. Silver joined the slump, dropping 0.8% to end the day at $16.30 per ounce, and platinum followed, falling 0.4% to end the day at $874 per ounce. Palladium was the only precious metal to see strength on Monday, rising 0.5% and ending the day at $960.20 per ounce.

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Precious metals were mainly pressured by US-China trade war tensions reducing. On Sunday, US Treasury secretary Steven Mnuchin stated that the US-China (FXI) trade war was “on hold,” as reported by CNBC. The Trump administration seems to have suspended its plan to impose tariffs on China as it pursues further trade talks, considerably easing tensions between the two nations.

[marketrealist-chart id=2740297]

Volatility and gold

Trade war tension reduction seems to have curbed haven bids for precious metals, which are known to positively react to market unrest (VXX), especially gold. As gold is known as a safety reserve, investors often turn to gold during times of market unrest.

Gold’s technicals also look unsupportive. Its 14-day RSI (relative strength index) score, a momentum indicator, was 35. Scores below 30 suggest a price rebound. Mining companies joining gold’s (GLD) downward movement on Monday were New Gold (NGD), B2Gold (BTG), Agnico-Eagle Mines (AEM), and Randgold Resources (GOLD), which fell 3%, 3%, 0.58%, and 1.6%, respectively.

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