The price of gold has risen – the US-China trade deal is not yet in sight


On Wednesday, 20 November, 2019 the price of gold increased after President Trump said on Tuesday, 19 November, 2019 that unless a trade deal between the US and China is reached, customs duties will be increased on Chinese imports into the United States. Thus, on 20 November, 2019 at 6:53 am CET the price of gold rose by +0.1492% to US$ 1,476.50 per troy ounce on the commodity market (COMEX).

According to analysts the current development in gold price on the global commodity market is a reflection of investors’ concerns regarding events in various regions of the world, along with the fear of the emerging global economic recession. According to these experts, the current riots in Hong Kong, which have already claimed several human casualties, are also responsible for the partial rise in gold price. Another and much stronger factor motivating the rise in the price of gold is the recent warning by Moody’s rating agency, which estimates that the next economic recession will have greater negative impacts, especially for the economies of European countries, than the previous financial crisis which dates back to 2008. According to Moody’s report, most European countries, including euro area countries, will be unable to pay their debts.

The Agency pointed out that there are currently twice as many B3-rated companies in Europe than three years ago. These would be considered speculative and risky investments. According to Moody’s, this signals that more non payments of debts can be expected in the next recession. Moody’s analyst Jegor Nikisin said to the Daily Telegraph that a period of economic downturn will raise doubts about companies’ ability to pay off debts and earn money. Over the past twelve months, there have been repeated concerns that a recession might be approaching in the wake of US bond yield curves. This is known as the inverse yield curve, where short-term bonds are more profitable than long-term bonds. This is unusual and often adumbrates recession. However, the markets calmed down again after a short disturbance, especially after the quarterly results of Great Britain and Germany showed a small growth in their gross domestic product (GDP).

However, based on this knowledge, information and already existing facts, investors’ attention has turned to gold as a traditional safe haven of financial value. On 20 November, 2019 at 7:23 am CET gold price continued to rise despite the relatively strong exchange rate of the US dollar. According to the US Dollar Currency Index (DXY) it was seen at 97.90 price level with a daily appreciation of + 0.05%. Analysts forecast that gold price can be expected to rise again in the short-term investment horizon above US$ 1,500 per troy ounce.