A storm is brewing as the U.S. continues to increase tension with Canada and China.
According to an article on Kitco, gold is gearing up to gain an additional $15 an ounce in order to overcome the next resistance level. Helping it along the way could be a renewal of trade tensions and a questionable secondary-currency market picture.
After a prolonged period of calm, a storm appears to be brewing as the U.S. and Canada passed their 90-day deadline to form a new draft for the NAFTA agreement. While the White House agreed to extend the talks by an additional 90 days, the situation reminded onlookers of the tense relations between President Trump and Canadian Prime Minister Justin Trudeau.
According to the article, both parties have made it clear that they will not budge on their terms, with Trump going a step further by hinting towards a possible exclusion of Canada from the trilateral agreement should no common ground be found. During his campaign, Trump criticized the NAFTA agreement, calling it one of the worst deals in history. More recently, the President minced no words in saying that Canada was taking advantage of the U.S. and threatening new tariffs in the absence of a mutual agreement.
Trump spoke similarly about the European Union, referring to it as exploitative and hinting towards heavier levies on car and vehicle parts, although no action has yet been made. China, on the other hand, will soon feel the brunt of their trade issues with the U.S. says the article, as the White House prepares to usher in a third round of tariffs on $200 billion of Chinese goods.
Besides trade flare-ups, the article states that gold was also boosted by the murky prospects of secondary currencies, against whom the dollar has weighed on heavily in recent times. The start of September signals an end to summer holidays for many traders and a somber return to their platform after several easygoing months. Hence, September and October are generally seen as months of worry, during which market participants become increasingly cognizant of risks in the global economy.
According to the article, this could lead to traders re-examining their position on secondary currencies and making other risk-off decisions. Some of this seemed to already show on Friday, when the soaring stock market finally gave way to mild profit taking.
The technical chart backs gold’s case, as the negation of the daily price downtrend suggests that the market has bottomed out. In the coming months, traders and gold bulls will keep a close eye to see if the metal can breach the next solid resistance.