Safe-haven gold may lose out to the U.S. dollar as the trade war between the U.S. and China intensifies, according to David Lennox, resource analyst at Australian brokerage Fat Prophets.
Gold has risen during this period of turmoil as well but “the momentum has been somewhat choppy because investors are looking to go back into the U.S. dollar”, he said in an interview to BloombergQuint.
Gold rose 1.8 percent this week, heading for its biggest gain since Feb. 16, first on the back of the U.S. Federal Reserve announcing a rate hike and now as the trade war escalates. The rise, however, hasn’t met expectations, Lennox said. “There has been a move back towards the U.S. dollar and back into the U.S. cash.”
U.S. President Donald Trump announced fresh tariffs worth $50 billion on Chinese imports as a recompense for intellectual property violations. That evoked a retaliation from China in tariffs worth $3 billion on pork, wine, steel products and more just hours later.
This may just be the beginning of it as Chinese ambassador to the U.S., Cui Tiankai, said that while the country does not want a trade war, “we are not afraid of it”. Trump, too, said that the tariffs were “first of many”, as he signed the order.
Lennox allayed fears of the trade war impacting India in a major way as it exports a very small portion of steel and aluminium to the U.S., which imposed tariffs of 25 percent and 10 percent, respectively, on their imports earlier this month.
Watch the entire conversation here: