Gold News

Gold Price Rallies vs Weaker Dollar as EU Retaliates in US Trade War

GOLD PRICES rose against a weakening Dollar in London trade Tuesday, regaining last week's 0.5% loss to reach $1329 per ounce but slipping in Euro and Sterling terms as talk of a "trade war" between the US and Europe grew.
 
After US President Donald Trump last week proposed new US tariffs on steel and aluminum imports, "We are looking at possibilities to retaliate," the EU Commissioner for Trade told the BBC, "[with] taxes or tariffs on US imports to the European Union."
 
The Japanese Yen also pulled back on the FX market, outpacing the retreat in the Dollar and helping gold prices erase most of last week's 2.0% plunge for Tokyo investors.
 
World stock markets rose meantime, following Wall Street's overnight gains, but major government bond prices fell, pushing longer-term interest rates higher.
 
UK and German bond yields both rose over 5 basis points on 10-year debt, reaching 1-week and 2-week highs that stood one-third and two-thirds higher respectively from the level at this point in March 2017.
 
Ten-year US Treasury yields rose to 2.90% for the fifth time in 3 weeks – a four-year high when reached in mid-February.
 
The last time 10-year US yields were higher than today, gold priced in the Dollar stood $100 lower per ounce.
 
 
On Monday the European Union handed its 28 member states a list of 100 US imports – worth around $3.5bn per year – it says could face higher taxes or tariffs, including Bourbon, jeans, corn, steel and motorbikes.
 
"This is just a hair's breadth away from a no-rules trade war," the Financial Times today quotes a US expert on World Trade Organization rules.
 
Set to vote on a post-Brexit trade deal for the UK next week, the European Parliament meantime sent its chief co-ordinator Guy Verhofstadt to London today to meet UK negotiator David Davis, saying that Britain must get beyond what he called the "vague aspirations" stated in Prime Minister Theresa May's much-heralded speech last Friday.
 
Lawmakers in the Netherlands today called for the closure of an EU website supposed to highlight 'fake news' but which recently named accredited Dutch news-sites.
 
Facing calls for a general election after the murder of an investigative journalist and his partner, the Prime Minister of EU and Eurozone member Slovakia meantime accused the country's President of conspiring with Hungarian hedge-fund manager George Soros to destabilize his government.
 
Thousands of Czechs in Prague protested Monday against the appointment of a former riot-squad chief who reportedly used water cannon, dogs and clubs against 1989 pro-democracy parades as head of the country's police complaints body.
 
Defeated Italian prime minister Matteo Renzi meantime resigned as leader of the center-left PD party following the weekend's election results, which split power between a Eurosceptic right-wing coalition and the Eurosceptic anti-establishment 5-Star Movement.
 
"The resulting uncertainty will presumably contribute to solid demand for gold," reckons a bullion-market note from German financial services group Commerzbank.
 
Gold priced in Euros however slipped again on Tuesday, re-touching last week's 1-month lows beneath €1070 per ounce.
 
The gap between Italian and German bond yields also retreated, dropping back from Monday's spike to around 1.4 percentage points on 10-year debt.
 
Commodity prices rose Tuesday, taking Brent crude oil up towards 2-week highs above $66 per barrel.
 
Silver prices rallied harder than gold, rising against all major currencies and recovering $16.61 per ounce – a level last seen before new Federal Reserve chief Jerome Powell hinted at more US interest-rate hikes than expected in 2018 in testimony to Congree last Tuesday,

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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