Gold has posted sharp gains in the Tuesday session. In North American trade, the spot price for an ounce of gold is $1336.39 up 1.19% on the day. In economic news, there are no major US events. Factory Orders were unexpectedly soft, with a decline of 1.4%. This was well short of the estimate of -0.4%. On Wednesday, the US releases ADP Nonfarm Employment Change.
In the US, tensions over proposed tariffs on steel imports continue to hurt the US dollar, which has been a boon for gold prices on Tuesday. President Trump appears set on applying stiff tariffs of 25% on steel, much to the consternation of the European Union and other US trading partners. However, there is plenty of domestic opposition to Trump’s plan, as Republican lawmakers, including House Speaker Paul Ryan, have come out strongly against the move. If Trump doesn’t back down, the Republicans could even resort to legislation to limit Trump’s authority on tariffs. The announcement of the tariffs last week sent the dollar broadly lower, and if the tariffs are introduced, negative investor sentiment could keep the gold rally going. Until this dispute is resolved, traders should be prepared for continuing volatility in gold prices.
Gold prices often climb in response to geopolitical tensions, and Britain’s exit out of the European Union seems to be getting bumpier each day. Tensions are growing between London and Brussels as the Brexit deadline of March 2019 looms ever closer. Last week, there were sharp exchanges between the two sides after the EU releases a draft of the legal framework of the Brexit agreement. On Friday, Prime Minister May outlined her vision of relations between the EU and Britain after Brexit. May sought to lower the recent sharp rhetoric surrounding Brexit, saying that both sides needed to show flexibility in order to reach an agreement. May said that she was seeking a free trade agreement with the EU that included financial services. The response from Brussels has been lukewarm, with some policymakers saying that Britain continues to operate under the illusion that it can leave the club but still enjoy the benefits.
