Gold Gains as Trade Deficit Widens | September 5, 2018
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Gold Gains as Trade Deficit Widens

blog | Published On September 05, 2018 by Everett Millman

Trade continued to be the focus of international markets Wednesday, sending equities lower across most of the globe.

Gold prices saw a slight boost in response. Spot gold rose about $5 (+0.4%) this morning to $1,196/oz.

Silver remained at a 21-month low and is currently at its cheapest against gold since 2008. Spot silver inched 4¢ higher (+0.3%) to $14.18/oz.

Palladium gained 0.5% to nearly $985/oz while platinum actually shed 0.25% to fall back to $775/oz.

Trade, Trade, Trade

Blue-chip stocks may be set for their fourth straight losing session due to heightened worries over the ever-expanding web of global trade tensions.

Of course, the focus is on the aggressive stance that the United States has taken against its biggest trading partners.

Aside from confrontations with China and Europe, American officials are locked in negotiations over NAFTA. While progress has been made between the U.S. and Mexico, the discussions may be stalled by a group of senators who will only ratify a trade agreement that includes Canada. The Trump administration has chosen to play hardball with Canada thus far as relations with Prime Minister Trudeau have soured in Washington.

Meanwhile, the latest trade data in the U.S. was less than encouraging. The trade deficit jumped 10% in July to over $50 billion during the month.

This puts the economy on pace for its widest annual trade deficit in about ten years. Imports were up almost 1.0% to a new record-high while U.S. exports sank by 1.0%.

Wall St opened lower in response. The 10-year Treasury yield held flat at 2.90%.

This did little to dent the outlook for corporate giant Amazon, however. The company has joined Apple as the only firms to ever achieve a trillion-dollar market capitalization. Amazon's stock price has skyrocketed this year and, not surprisingly, CEO Jeff Bezos has seen his net worth climb by tens of billions of dollars in 2018 alone.

Aside from the precious metals, trade fears weighed on commodity prices. This was despite a pullback for the USD. The WTI crude benchmark slumped 0.9% to $69.25/bbl in early trading.

Weaker Dollar Caries the Day

In most other respects, the dollar has been the beneficiary of trade uncertainty. The USD has advanced over 8% since the middle of March, which is (not) coincidentally when President Trump began issuing his first serious threats about a trade war.

The DXY index was down 0.2% to 95.25 this morning.

The weaker dollar offered no salve to battered emerging-market currencies. To put the losses into perspective, the Argentine peso is down 50% year-to-date—meaning it has given up half of its value—and the Turkish lira has fallen 40% over the same span.

The Indonesian rupiah also fell as the country's main stock index tumbled 3.8%.

By contrast, the major peer currencies of the dollar made up ground. The pound sterling surged 0.8% to $1.296 on optimistic comments from Prime Minister May about potentially meeting the deadline for a Brexit deal.

The euro also gained 0.35% against the dollar to trade at $1.162.

Nonetheless, manufacturing PMI in the U.S. registered at a 14-year high during August.

Shares were down sharply overnight in Asia. The Shanghai Composite closed down again (-1.95%) after finally breaking its losing streak the previous day. Equities lost about 2.4% in Hong Kong.

Japan was hit by the strongest typhoon the country has endured in a quarter-century. Stocks in Tokyo were down 0.5% on the Nikkei 225 and fell by 0.75% on the Topix index.

Italian markets (both its stocks and bonds) stood out as Wednesday's winners in Europe, yet the rest of the region saw indices slump by almost 1.0%.

Cryptocurrency prices dipped as Goldman Sachs is reportedly putting its plans for a crypto trading desk on hold. Bitcoin held just above the $7,000 level.

In other news, there is currently a bitter political battle taking place on Capitol Hill over the confirmation of President Trump's nominee to the Supreme Court, Judge Brett Kavanaugh.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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