A Trade War Or A Real War Is Bullish For Gold

London (Apr 16)  The price of gold traded to a low in December 2015 at $1046.20 per ounce, and since then the yellow metal has been making higher lows. In July 2016, the shock of the Brexit referendum and uncertainty surrounding other European elections in light of a rejection of the EU sent gold to its highest price since 2014 at $1377.50 per ounce.

Recently, the precious metal has been flirting with those highs and has found a base around the $1300 level. Gold wears many hats; it is a metal or a commodity, and it is the longest-standing world currency. Long before the dollar, euro, yen, yuan, or any other foreign exchange instruments became legal tender, gold was a means of exchange. Every ounce of gold ever produced in the history of the world still exists in above ground stocks or individual holdings. Gold ownership only lasts a lifetime, while the metal continues to exist long after we are gone from this world.

The yellow metal has come a long way from the turn of the century when the price was below $300 per ounce. Gold has not traded below $1000 since 2009, and it has been above $680 per ounce for over a decade. These days, many bullish factors could push the price of the precious metal back over the $1400 level and launch it on an attack of the all-time nominal high of $1920.70 from 2011.

Trade tensions ramp up and cool down - tariffs are historically bearish for the dollar

One of the most significant issues facing markets over recent weeks has been protectionist policies announced by the Trump Administration. On the campaign trail, the President pledged to level the playing field when it comes to foreign trade. He blamed past administrations for multilateral trade deals that put U.S. workers and products last when it comes to international trade and promised to renegotiate "better deals" for American interests. In March, the administration rolled out 10% and 25% respective tariffs on aluminum and steel and announced $60 billion in protectionist measures aimed at China. When the Chinese threatened to retaliate, President Trump upped the ante saying he would add an additional $100 billion in tariffs on the world's most populous nation. After trade rhetoric reached a frenzy at the beginning of this month, China's president Xi made a conciliatory speech in Beijing which amounted to an olive branch, which the U.S. leader accepted as a sign that negotiations would eventually reach an accommodation and deal on trade.