How did gold benefit from the trade war ?
How did gold benefit from the trade war ?
Gold is considered as the perfect investment under the fierce trade war between the US-China conflict. In early August, Washington announced it would impose a 15 percent tariff on Chinese imports worth 300 billion dollars. Beijing will pay 5 percent to 10 percent on goods worth 75 billion US dollars. If these conflicts continue without a clear and explicit agreement that satisfies both parties and allows all means of cooperation between the two largest economies in the world at the present time, it is in the interest of the prosperity of the yellow metal as a safe haven.
With the review of the performance of gold compared with the performance of the S&P 500 and the index on consumer goods, we noticed the superiority of the yellow metal on the two indicators, as shown in the following chart
The second chart is a monthly chart showing the ratio between gold and the S&P 500 index, which shows the superiority of gold over the stock market in general as long as this ratio is moving above the 24-month moving average over the long term, indicating the high risk and resort to funds for gold as a safe haven
And if we notice the period from January to October 2016 in the chart below when this ratio exceeded the 24-month moving average, gold profits exceeded 27% during the nine months.
While for the time being, since the ratio exceeded the moving average again at the beginning of May of this year so far, gold has achieved 17% profit in the past five months.
As trade negotiations continue to be obstructed at the request of China for more time to study the details before conciliation, gold gains are expected to continue in the near future.