Is the Fear Trade-Off Too Soon?
It’s an odd morning we find ourselves with.
The US dollar price gold dropped US$10 per ounce overnight…
…and down a total 2% in the past five days.
Does this mean the gold bull market was over before it begun?
The fall can be traced to two things.
Firstly, there’s probably a lot of profit-taking from institutional dealers. The yellow metal has seen a solid run up in the past few months.
The second, comes down to the interpretation of something Trump said at the end of last week.
Last week the gold price began to fall on the idea that the US was ‘considering’ rolling back some of its tariffs.
However, Trump then reminded us on Friday, that he hasn’t actually agreed to anything yet. With the Wall Street Journal noting:
‘President Trump on Friday disputed China’s assertion that the two countries had agreed to roll back tariffs as part of an interim trade accord, but he also said progress was being made toward resolving the long-running trade war.
‘“I haven’t agreed to anything,” Trump told reporters at the White House. “But we’re getting along very well with China. They want to make a deal. Frankly, they want to make a deal a lot more than I do.”’1
Of course, while Trump is often full of bluster, there’s a chance the markets have gotten over-excited about a deal that might not happen.
In other words, people may have gotten out of the fear trade before there’s an agreement in place.
Not only that, but gold’s sell-off comes in the middle of global social turmoil.
As Jim points out below, the pro-democracy protestors in Hong Kong are becoming more dangerous by the day…and people continue to do business with China in spite of their horrid human rights violations.
The question to ask yourself is, is this really a gold price sell-off…or more like the yellow metal just taking a breather?
I’ll answer that question in more detail later in the week.
In the meantime, it’s over to Jim.
Until next time,