The US raises tariffs, China weakens the Yuan

Gold Crashes to Two Week Low – Top 2 Things to Know About it

Posted Wednesday, November 28, 2018 by
Arslan Butt • 1 min read

What’s up, fellas.
GOLD prices remain steady near $1,214 during the Asian session, but after hitting their lowest in nearly two weeks in the previous session $1,211.95. Well, if you are wondering what caused a massive sell-off in gold, let me help you understand it…

1) The U.S. central bank’s second-in-command announced, the “Fed should be even more attentive to new economic data as its gradual interest rate hikes edge it ever closer to a neutral stance”. The comments came before the FOMC meeting minutes later this week, affirming the rate hike sentiments.

2) U.S. President Donald Trump is open to seizing a settlement on US-China trade troubles over dinner on Saturday with Chinese leader Xi Jinping. However, in case of no breakthrough in negotiations, Trump will be inclined to hike tariffs on Chinese imports.

Both of these fundamentals increase the demand for the US dollar. For instance:

  • Fed Rate Hike sentiment urges investors to move their funds in the US dollar as the major currency will be in demand upon the rate hike.
  • Trade War, tariff hike from 10 to 25% – This triggers the safe haven demand, only this time, investors will be moving funds in the US dollar as the United States has less to lose in this deal. Speaking about the stronger dollar, gold drops ultimately. We need to trade the market with this sentiment ahead of G20 Summit on November 30.

Good luck!

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About the author

Arslan Butt is our Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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