Gold may rally towards years end
Published on 19.09.2018 18:27

After a horror 6 months the gold price has found much needed support over the last 4 weeks and is now sitting above the $1,200 mark and depending on the outcome of the trade wars between the US and China as well as upcoming congressional elections in November.

Trump announced on Monday a further $200 billion of tariffs against China who immediately retaliated with $60 billion of their own and the danger is now that the US will introduce even more tariffs that will cover nearly all of China’s exports.

This will hit the major companies such as apple who have major production facilities in China which lead some to believe that the tariffs will do more harm than good to America as consumer prices rise.

This may be the opportunity that gold has been looking for to break out of it’s recent range a investors once seek out the precious metal as a safe haven at the expense of the US dollar.

Over the last week there have already been signs of a reduced demand for the greenback and movements into gold as participants in the market position themselves for what they see is the inevitable consequences of the trade wars.

“It is worth noting that investors are of the belief that robust economic growth will shield the United States from the impacts a global trade war may present,” said Lukman Otunuga, research analyst at FXTM

 “A scenario where a trade war disrupts global growth and weakens the U.S. economy could trigger some safe-haven flows into gold. This assumption is based on the dollar depreciating and losing its safe-haven status.” He added.

Another factor that may provide support for the gold price and give it a real boost depending on the outcome is the congressional elections due in November where Donald Trump’s republican party are in real danger of losing their Majority in the house of representatives.

Some speculate in a worst case scenario this may be the beginning of proceedings to try and remove the president from office.

 “It is no secret that Donald Trump’s presidency hinges on the mid-term elections if the Democrats gain control of the House of Representatives in November, impeachment proceedings could begin in fairly short order” said Jonathan Butler, precious-metals strategist at Mitsubishi Corp

 “The political uncertainty engendered by an impeachment could see the dollar lose ground and give some support to gold.” He added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

The world of trading has no boundaries

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

×

Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.

Important notice
By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.