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Gold Jumps on Fading Hopes for 2019 Trade Deal with China

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Gold Jumps on Fading Hopes for 2019 Trade Deal with China
By John McDonald 

Gold rallied more than 1% yesterday when President Trump said trade talks with China might extend into 2020, past the November election. Stocks have bounced around since that time as the president described the tariff discussions as “going very well” shortly after speculating a deal might not happen until the end of 2020. 

Bob Haberkorn, a senior market analyst at RJO Futures, called the yellow metal’s movement the result of a “flight to safety in gold” after the president’s predictions. 

Part of investor uncertainty likely lies in questions about whether the two countries will reach some sort of agreement – temporary or permanent – before the December 15, 2019, deadline for the next round of U.S. tariff hikes. 

After the announcement, gold gained 1.12 percent before the end of the day. Values reached as high as $1,481.80, the highest point since November 7 of this year. Gold futures were up 1.1 percent to $1,484.40. 

With China only one point of concern among many for investors watching U.S. trade policy, holding gold is looking more appealing than ever before. The administration also announced new tariffs on French goods in response to the end of a moratorium for U.S. companies on a French digital tax and on Brazil and Argentina. 

The French digital tax targets mainly U.S. companies like Google and Facebook, which Trump has said publicly he “does not love” but still must defend. The European Union has said it will stand with France and is “ready to retaliate” if the hefty tariffs on champagne, cheese, and dozens of other French products go into effect. 

Precious Metals Rallies Abound (With One Exception)

As gold begins to look increasingly appealing to investors, other precious metals are gaining as well. Silver rose 1.6 percent to $17.17 per ounce on Tuesday as well, while platinum heated up to $909.05 (up 1.3 percent). 

Haberkorn predicted, “If gold and silver heat up over the next year because of an extended trade war, platinum will naturally get pulled in.” Interestingly, he excluded palladium from the equation. 

“Palladium…is a little too high on a lot of supply concerns,” he said. “How high palladium can go depends on how much the car makers are willing to pay.” Some analysts speculate palladium is presently too high and a correction will come soon.

Saxo Bank analyst Ole Hansen warned, “We may see palladium hitting $1,800 before it gets a chance to hit the $1,900 range.” At present, the metal is trading just under $1,850. 

Sources: CNBC, MarketWatch, Reuters

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