The Trump Administration has recently chosen to put tariffs on steel and aluminum imports, leading many to believe a trade war is imminent. Below are some ways in which trade conflicts influence the price of gold and precious metals, and what jewelry dealers and consumers can likely expect going forward.

Trade Conflicts And Gold

Traditionally, the prospect of a trade war causes gold prices to rise, while the dollar and other currencies may fall. Investors demand assets that will give them protection, and bullion in particular is sought after. The decision recently made by the U.S. to put tariffs on aluminum and steel imports will prompt other nations to respond in kind. This has caused the USD to plummet from its 6 week high, which results in gold that is dollar denominated being cheaper and more attractive, especially for investors using other currencies.

Economic conflicts between nations come with significant risk, and it can be difficult to tell which side will prevail. This uncertainty is favorable for gold and other metals such as silver and platinum. Spot gold is currently up about 0.13 percent, while American gold futures since April are about 1 percent higher. Its prices have also slipped slightly due to news from the Fed that it could increase interest rates.

Trade Wars In Relation To Gold And Interest Rates

Historically, excessive interest rates have had an adverse impact on gold, since they increase bond yields which results in reduced demand for the metal that are non-yielding. However, the advent of a trade war can disrupt this cycle. Should the conflict manifest itself, which seems to be actually occurring, then the traditional rules no longer hold.

This is because trade wars tend to lead to higher inflation with slower growth, and many experts expect this will lower the Fed’s aggressiveness. Another good sign for this metal is the fact it has held its moving average for about 100 days, at about $1,300. This has an important psychological impact on investors. Technical resistance for the near term (roughly fifty days) is around $1,324 per ounce. Bullion prices were maintained due to an increase in gold-related holdings by ETFs, or exchange traded funds.

How Trade Wars Influence Other Precious Metals

Metals such as palladium, silver and platinum behave in a manner that is very similar to that of gold. Silver in particular has many industrial uses, much more so than this metal, so it will most certainly be affected by a global trade conflict. The extent to which it will be affected remains to be seen, but currently silver is down slightly at 0.09 percent. Platinum, which is popularly used in jewelry and automobiles, will also be influenced by trade wars. However, like silver it is trading slightly lower at 0.25 percent.

Both investors and jewelers that choose to stock up on gold and other precious metals while prices are low, before the trade war really heats up, could enjoy substantial gains.