$GLD, $XAU, $SLV, $USD, $GOLD, $NEM, $VXX
FLASH: Gold is finally seeing some bullish momentum as trade ructions escalate, fueling the biggest rally among the top miners in seven months.
President Trump’s plan to impose a 5% tariff on all Mexican goods over illegal immigration rattled financial markets, boosting the haven appeal of the precious Yellow metal that has been weighed down by the strong USD. China’s threat to blacklist foreign firms it accuses of damaging its interest also added to the global uncertainty that’s strengthening the case for owning bullion as a store of value.
Global equities marked the worst month since December 2018, and there are growing signals that an economic slowdown is imminent, with the outlook for China’s manufacturing sector deteriorating more than expected in May, according to data released Friday.
The US is demonstrating that they can weaponize trade instantly, from China to Mexico, it sends a message that no country is safe. Gold is picking that up.
Gold futures for August delivery climbed as much as 1.3% to $1,309.50 oz. the highest for a most-active contract since 11 April. The precious Yellow metal finished + 1.7% in May, snapping 3 months of losses.
A gauge of the biggest gold producers tracked headed for its steepest gainer since 18 October; Barrick Gold (NYSE: (GOLD) was among the biggest winners, with shares climbing 4.3%. Newmont Goldcorp (NYSE:NEM) advanced 2.4%.
The market is kind of risk-off, but the volatility index (VIX) is up, so people are just buying gold again, and are thinking that this trade dispute between China and the US may be deeper than estimated.
A Key supportive factor for gold is the potential for a Fed rate cut. The central bank is prepared to ease if it sees mounting risks to the expansion, Vice Chairman Richard Clarida said Thursday while stressing the economy is in a “very good place” with unemployment low and inflation muted.
The Fed’s rate cuts provide considerable scope for gold gains. Silver should benefit in this event, following gold’s upward course. At the moment, though, silver remains relatively weak.
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