Will Geopolitical Concerns Prop Up The Price Of Gold?

Will Geopolitical Concerns Prop Up The Price Of Gold?

By TLB Contributing Financial Writer: Jennifer

Recent geopolitical news has gold bugs excited. While most shake their heads when they hear of a trade war on the horizons, a Secretary of State being fired, or rising tensions between Russia and the UK, the gold bugs see geopolitical tensions as an opportunity. So, what’s going on in the world of geopolitics that has the gold bugs excited, are recent developments in geopolitical news likely to lead to gains in gold, and what should you be watching for ahead? Today, we’ll cover all of these topics.

The Geopolitical Space Is A Busy One At The Moment

Gold is a safe haven investment. Therefore, when geopolitical concerns lead to economic or market concerns, they could also lead to gains in gold prices. So, what’s going on in the geopolitical space? Well, there are a few big stories:

  • Trade War – One of the biggest topics in the geopolitical space at the moment is a potential trade war. Recently, United States President, Donald Trump, announced that he would be imposing tariffs on steel and aluminum imports into the United States. Because this would create an economic burden to many regions including China, Canada, Europe, and more, many believe that these tariffs will result in a global trade war.
  • Trump Fires Tillerson – More recently, we’ve seen stories breaking that President Trump has made the decision to fire his secretary of state, Rex W. Tillerson. Trump said that he would replace the position with C.I.A. director Mr. Mike Pompeo. With the shakeup in the most senior leadership within the United States in mind, many are concerned with regard to what’s next for the US economy.
  • Tensions Between Russia And The UK – Finally, the newest story hitting the tape at the moment has to do with Russia and the UK. On Wednesday, UK Prime Minister, Theresa May, announced that the UK would expel 23 Russian diplomats from the country. Ultimately, the story stems from a recent poisoning of a british spy and his daughter on British soil, an attack that the UK has come to the conclusion has happened at the hands of the Russian state.

Are These Developments Likely To Lead To Gains In The Price Of Gold

If there was nothing else to consider, the answer would clearly be yes. At the end of the day, as a safe haven investment, gold tends to increase in value when geopolitical concerns arise. However, at the moment, there’s quite a bit more to look at when predicting where gold is headed.

First and foremost, economic data out of the United States has been overwhelmingly strong as of late. So, it is doubtful that the firing of Tillerson will lead to enough of an economic concern to cause any movement in the price of gold. On top of that, this economic data suggests that the Federal Reserve will become more aggressive with rate hikes. If this happens, we’ll see further pressure on gold from a mix of a stronger dollar and further safe haven competition.

This, in combination with the fact that economic conditions are on the upswing just about everywhere around the world leads me to believe that gold isn’t likely to spike in value any time soon. While we may see minor improvements in the price of the precious metal here and there, positive economic conditions around the world are likely to hold some resistance over the commodity.

What To Watch For Ahead

While it doesn’t look like we’re going to see dramatic gains ahead, the market can be unpredictable and I can’t tell the future. With that said, keep a close eye on news associated with the potential trade war as well as tensions between the UK and Russia. Also, pay attention to other factors having to do with supply and demand of the precious metal for clues as to where it’s headed next!


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