Gold Hits Daily Highs as Stocks Sell Off on China Trade

(Kitco News) – Gold prices are moderately up and have hit daily highs in late-morning action Thursday. Some safe-haven demand is featured today as the U.S. stock market is selling off again, with the major indexes hitting multi-week lows.

U.S.-China trade tensions that have intensified late this week are spooking world stock and financial markets, which is benefitting gold. June gold futures were last up $3.60 an ounce at $1,285.20.

China Trade , Crossed Wires

( CNN, May 9 th, 2019 ) – Trump has a habit of making policy on Twitter, but his pronouncements on Sunday did not come from nowhere. 

US officials told CNN that at the most recent round of trade talks in Beijing, their Chinese counterparts sought to renegotiate significant aspects of a prospective deal that the Americans felt were already wrapped up. 

According to Reuters, a cable sent from Beijing to Washington late Friday included systematic edits “riddled with reversals by China that undermined core US demands.” These reportedly included backtracking on commitments to change laws over intellectual property and trade secrets, competition policy, and currency manipulation. 

Speaking to reporters on Monday, Mnuchin said there were “some signs” negotiations were “going substantially backwards,” prompting him to update the President. 

US officials said that Trump’s tweets were meant to rattle Beijing, and were made without extensive discussions with his economic advisers. 

What exactly inspired Beijing’s broadside is unclear — a constant peril of dealing with such an opaque political system — but it appears to be based on a misreading of statements and actions by Trump that he was concerned about the state of the US economy and would be willing to make concessions. 

Last week, Trump laid into the US Federal Reserve on Twitter, echoing criticism he made of its chairman Jerome Powell last year, while praising Chinese policy. 

“China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing,” Trump said in a series of tweets. 

“Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records (and) at the same time, make our National Debt start to look small!”

Beijing’s perception of US weakness was likely buoyed by its own improving economic situation, with solid first-quarter growth and renewed commitment to Xi’s trademark Belt and Road Initiative, which was feted at a conference in the Chinese capital last month attended by dozens of world leaders. 

The assumption that this position of renewed strength would be enough to make Trump blink seems wildly miscalculated, however. Not only is the US economy not nearly as weak as some in Beijing appear to believe, this type of last minute renegotiation seems almost specifically designed to infuriate Trump. 

The US President has already shown himself willing to walk away from deals when they don’t go his direction — storming out of his second meeting with North Korean leader Kim Jong Un in Hanoi, derailing months of rapprochement between the two nuclear powers. 

That he would respond equally poorly to strong arm tactics on trade would have been obvious to any longterm observers of Trump except, it turns out, those in Beijing. 

Posted By :

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com