Trump, Xi And Gold

Last week, Donald Trump met with Xi Jinping. What does it mean for the gold market?

A meeting between U.S. President Donald Trump and China’s leader Xi Jingping was held last weekend. It was their first summit and was overshadowed by the U.S. strike in Syria. Some analysts even say that the timing of the meeting was arranged to increase leverage on China. Anyway, an encounter between leaders of two world’s largest superpowers should not be overlooked. What could it mean for global geopolitics and the gold market?

Experts say that the meeting was a success. Both sides remained cordial and agreed on a trade plan. In particular, China will make concessions to give the U.S. better market access in financial and beef sectors in efforts to address the trade imbalance between these two countries. If these efforts succeed, the possibility of a trade war will diminish. The reduced uncertainty about trade tensions between China and U.S. should be negative for the gold market in the long run.

However, in the short term, the meeting could be positive for the yellow metal. This is because Trump repeated his warning that if China did not do more to address the nuclear threat out of North Korea, the U.S. would act alone to constrain the regime of Kim Jong-un. He tweeted: “North Korea is looking for trouble. If China decides to help, that would be great. If not, we will solve the problem without them! U.S.A.” Actually, a U.S. aircraft carrier strike group sailed toward the Korean peninsula. The situation even triggered a phone call between Xi Jingping and Donald Trump on Wednesday.

The rising tensions over North Korea are – along with the situation in Syria – the reason why the geopolitical uncertainty has risen recently, and why gold prices have continued their rally. However, investors should remember that gold’s gains on geopolitical events are often ephemeral. A lot depends on the resolution of key geopolitical events in the near future.