The Effects of the US-China Trade War on Gold Prices
An Overview
Two of the largest world’s economies – the U.S and China – have been in a trade battle since 2018. Because of this trade war, both countries have imposed billions of dollars in tariffs on one another’s goods.
The president of the United States, Donald Trump, accused China of its theft of intellectual property and other unfair practices.
In China, it’s considered that the U.S. is trying to rise as an economic power of the world. Negotiations have proven to be complicated. In January 2020, both the countries signed a deal, but the pertinent issues still remain. This uncertainty caused by the trade war has damaged business and burdened the global economy.
Effects on Gold Prices
Gold prices have increased by as much as45% in the past year, and experts believe it’s not going to stop here. U.S President Donald Trump thinks that the pandemic was a “horrible mistake” by China.
According to a report by Reuters, the intimidation of this trade war between the two economies will increase the demand for gold, as a safe haven asset, given the fallen state of the global economy.
In the past four months, the price of gold has gone up from $1582 to $2001. It’s an increase of almost $500 per ounce. Given the current conditions of low long-term rates, demand for gold exchange fund trades, volatile equity markets, central banks’ net buying, and the unstable global economy due to the trade war and COVID-19, the prices of gold will surge further.
Gold as Safe Haven Asset
Gold has long been considered a trusted store of value. It’s readily available to invest in but comes with a finite supply. Therefore, it’s rare enough to be counted as valuable.
Since it’s an un-reactive metal, it’s durable, and one can easily store it as an investment. The rates of gold are usually in dollars, and they have an inverse relationship with the dollar value.
Gold is a safe haven asset because it does well even in financial crises – at a time when riskier assets like property, bonds, and shares under perform. Gold is considered a safe haven as it has maintained its value as a rare, precious metal for a long time.
Therefore, it’s safe to invest in gold. It doesn’t matter if the economy hits a low, the gold price will rise and prove fruitful towards your investment portfolio.
What Should You Do?
Because of the preliminary deal with the U.S. and China, the trade war will not end anytime soon. Having gold in your portfolio can provide diversification and profits. We recommend that you stay put towards your asset allocation and don’t go overboard investing in gold. Don’t go beyond 10% asset allocation.
If you’re looking to purchase gold for investment, visit Orion Metal Exchange. We have a range of coins from Canadian Maple Leaf, American Eagle, Canadian Mint Polar Bear, and Great Britain Queens Beast. Our services include gold and silver IRA, secure vaults, precious metal custody, and home storage facilities.
