Amidst escalating US-China tension, why ins’t the price of gold moving higher?

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May 22, 2019 1:04pm NYSE:GLD

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From Naeem Aslam:

Gold has been out of luck for the majority of the year so far. The year to date (YTD) performance of the precious metal sits at -0.46 percent. This is despite the fact that the Federal Reserve has adopted a dovish stance towards their monetary policy and there are serious concerns over the ongoing Trade War between the United States and China. In fact, the mainstream Chinese media has adopted a very aggressive tone against the U.S. with the Chinese media sending a clear warning that the dispute is going to hurt U.S. companies the most because of their exposure in China. According to the “Treaty damage to the U.S. hinterland” a 25% tariff increase on Chinese companies is going to impact 1 million U.S. jobs and will also anchor the financial market turmoil further.


However, despite this major uncertainty, there is no appetite among trader for holding the safe haven- gold . The chart below shows that the SPDR Gold ETF has experienced its largest outflow since 2016, with an outflow exceeding $926 million in the first week of May alone. Having said this, the bleeding didn’t get much worse and this is because as of the last week, the inflow was $120 million which is better than the previous week’s outflow number of $303 million.
GOLD SPDR ETF Flow

GOLD SPDR ETF Flow

THINKMARKETS, BLOOMBERG

The relation of the Dollar Index to the gold price is always interesting, one goes up and the other goes down, mostly. The chart below shows that the gold price has lost value due to the strength in the Dollar Index and this trend is still robust.

The question which comes to mind is: why is the Dollar Index still strong if the Fed isn’t going to change its monetary policy?


The SPDR Gold Shares (GLD) was trading at $120.33 per share on Wednesday afternoon, down $0.03 (-0.02%). Year-to-date, GLD has declined -2.68%, versus a 7.40% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 35 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of Forbes.


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