Gold has inched lower on the Wednesday session. In North American trade, the spot price for one ounce of gold is $1274.11, down 0.06% on the day. On the release front, the U.S current account deficit narrowed to $124 billion, beating the forecast of $129 billion. As well, Existing Home Sales dropped to a 3-month low. The reading of 5.43 million was well shy of the estimate of 5.52 million. On Thursday, the U.S releases manufacturing and employment reports.
In times of crisis, nervous investors often turn to gold, a safe-haven asset. However, since the start of the new round of tit-for tat tariffs between China and the U.S began on Friday, gold has defied expectations and lost ground. The base metal has declined 2.2% since Friday, as the U.S dollar has flexed is muscles against gold as well as other major currencies.
Investor risk appetite has waned this week, as the nasty trade war rhetoric between the United States and China continues to worsen. There are growing fears of a global trade war, which would take a toll on the global economy and could trigger a worldwide recession. The most recent round of the trade spat between China and the U.S started on Friday, when the U.S announced a 25 percent tariff on $50 billion in Chinese goods. After China responded with an identical move on U.S. imports, President Trump shook up the markets after he threatened to impose a 10 percent tariff on some $200 billion in Chinese goods. Not surprisingly, China has threatened to retaliate to this latest move. Trump has vowed to take action on the $375 billion trade deficit that the U.S has with China, claiming that the latter is guilty of unfair trade practices. With the first of the U.S tariffs scheduled to take effect on July 6 and no signs that either side will blink first, traders should be prepared for further volatility in the markets.
