August gold futures have seen whipsaw trading with moves as high as $40 in intraday trading as investors digest world trade news and economic data. In my opinion, there is one real driver of the gold run-up and it’s not hard to understand. Looking at the U.S. trade war with China, you can see that we are going nowhere fast. A trade truce at the G20 is kicking the can down the road with no end game in sight, and a strong headwind for the economic engine of the world that is global trade. The U.S. just ratcheted up trade tensions with the EU recently, and today it was announced 400% tariffs are to be implemented on Vietnam Steel. Steel shipments from Asian countries are routed through Vietnam to avoid extra costs. The fact that tariffs are now being increased on other countries and with more frequency has investors worrying about the health of the global economy in the future, hence the flight to safe havens such as gold.
Another thing to consider is that Indian gold imports rose by 12.6% vs a year ago. India is the largest consumer of gold in the world, hence why investors pay attention to this. I believe that there are enough bullish fundamentals regarding the supply/demand balance to keep gold elevated but think that $1400 needs to be the new floor for further buying to be justified. Look for the possibility of “blow off tops” that could be made on June 25th, and July 3rd (today) as we test this new unchartered territory.
Gold Aug ’19 Daily Chart