The record-setting rally in the gold market paused on Thursday as many investors opted to cash in their gains just before the long weekend gets underway. Bullion lost 1% on the day, but the price stayed above $3,300 an ounce because of the escalating trade war between the U.S. and China, and the weakening dollar.
Spot gold slid to $3,302 per ounce, reflecting a 1.2% drop from the $3,357 level it had reached earlier in the day. U.S. gold futures retracted to $3,315, a 0.9% loss from their peak level. Overall, gold has registered a 2% gain during the week.
Allegiance Gold’s COO Alex Ebkarian commented that what was happening is normal since gold was in a bull market. The minor correction, he added, was a result of profit taking and didn’t mean that the market was changing from bullish to bearish.
Earlier on Wednesday, gold had gained 3.6% after Trump ordered for a probe into possible tariffs on all imports of critical metals. He also ordered that reviews be conducted on imports of chips and pharmaceuticals. These orders deepened fears about the deepening trade war and caused more investors to flock to the safe haven asset, gold.
Some analysts revealed that there was a degree of risk to the continued rise of gold due to the possibility of a trade deal being announced during the weekend. They point out Japan as the likely country to get a tariff reprieve of some sort from the U.S. This possibility may be behind the profit-taking just before the weekend gets underway. However, the analysts reaffirm that gold is still firmly bullish given the deep concerns of markets around the world.
Trump boasted of “big progress” on Wednesday during his administration’s talks with Japan about the tariffs. These discussions are among the first direct negotiations being held since the American President announced sweeping tariffs affecting most, if not all, trading partners of the U.S.
Trump’s revelation about the progress in discussions with Japan caused the dollar index to tick upwards, but its weekly performance remained in the red. When the dollar weakens, the cost of holding gold reduces for those who are using other currencies to own this asset.
As the main macro factors, especially the trade war and other geopolitical risks remain largely unchanged or are even getting worse, gold looks set to remain on firm bullish ground. This bodes well for gold exploration companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) as investor interest is likely to spill over from bullion to the companies involved in looking for and extracting this metal from the earth.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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