Gold is up $40 today to $3219 in an impressive $110 intraday turnaround after falling as low as $3120 in Asia-Pacific trade.
There is a growing conversation about US fiscal sustainability and its erratic trade war. Trade tensions have fallen and gold has fallen at the same time but we’re still not clear on where the end goal is or how to get there.
The only trade deal so far is between the US and UK. It was a win for the US but trade between the military allies is surprisingly small and limited, with the major categories of trade getting exemptions. Will other countries offer anything in order to get 10% tariff rates in the US? That’s hard to believe until we see it.
With that, the fear (and what’s boosting gold) is the possibility that we’re just in an ebb in trade negotiations.
Maybe the bigger question is how all these events are seen abroad. Certainly, this is at least a nudge towards some level of de-dollarization or de-integration. Trust in US trade and military treaties is certainly stretched.
At the same time, we’re watching the US fiscal package unfold and it looks like there won’t be much austerity, with +6% deficits-to-GDP ratios forever.
This article was written by Adam Button at www.forexlive.com.
