The gold price has bounced back today after last week’s heavy losses as news surfaced that China is planning to introduce tariffs in retaliation for US President Donald Trump’s decision to stick tariffs on aluminum and steel.
The world’s 2nd largest economy wants to add an extra 25 percent in tariffs to products such as pork, wine and an array of fruits which some say will hit the respective US industries hard.
Predictions are now coming true that this may turn into a full-scale trade war as the US is bound to introduce even more trade tariffs with China once again retaliating and gold is likely to be one of the main beneficiaries of this situation.
"The trade war is going on and it is getting worse, so that might be the reason that people are selling dollar and buying gold," said Yuichi Ikemizu at ICBC Standard Bank in Tokyo.
The recent volatility in world equity markets, and especially markets in the US is another reason to take positions in gold as investors seek out safe haven assets to hedge their portfolios and some predict there could be a rise of around $100 if the volatility persists.
“Investors are quietly trying to get back into the gold market because of the risks that are growing in the global market place. Investors are still underweight gold,” said Maxwell Gold, head of investment strategy at ETF Securities
“My bullish case for gold this year calls for prices to be between $1,400 and $1,450 and I do think we can get there sooner if we see a continued selloff in equities,” he added.