Gold lives up to its safe-haven reputation amid trade war fears

London (Apr 8)  Gold posted strong gains in the second half of last month amid trade war worries and geopolitical tensions. The classic safe-haven buying trend picked up, as US President Donald Trump imposed high import tariffs on several important commodities. It accelerated, as geopolitical tensions stemming from the Middle East stirred up again, only cooling down ahead of the holiday break. These arguments appear to support the case for gold outperforming in 2018.

Taking the drivers one by one, the trade war worries flared up during the middle of last month when the Trump administration slapped high tariffs on steel and aluminum. Both commodities are used extensively in construction and industry, and the tariffs represent a significant block to foreign companies selling to the US.

The country was the world’s number one steel importer, with a recent peak in 2015 of imports valued at US$30.5 billion. Between 2009 to 2016, a massive steel deficit was built up amounting to minus 269 per cent. The White House’s protectionism may boost domestic steel producers, but fears over a global trade war rippled through the markets, boosting gold. Risk-off patterns emerged, and animal spirits only started to calm down after the news that the EU would be exempt for the time being from steel import tariffs to the US.

TheNational