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Gold Loses Safe Haven Appeal as Trade War Boosts JPY, CHF, EUR

Gold Loses Safe Haven Appeal as Trade War Boosts JPY, CHF, EUR

2018-06-26 09:30:00
Martin Essex, MSTA, Analyst and Editor
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Trade war news and analysis:

- The US China trade war continues to prompt demand for safe havens, with flows into the Japanese Yen, the Swiss Franc and the Euro.

- However, one traditional safe haven, Gold, is singularly failing to benefit.

Check out the IG Client Sentiment data to help you trade profitably.

Trade war continues to damage market confidence

The prospect of a US trade war with China, the European Union and others continues to prompt flows into assets seen as safe havens at times of market turmoil. That is again boosting two of the traditional havens: the Japanese Yen and the Swiss Franc. However, the Euro seems to be joining the haven ranks at the expense of Gold, which is seeing little demand.

The latest trade war developments are still worrying the markets, including proposed restrictions on foreign investment in US technology companies and a warning by Harley-Davidson that it would focus on shifting some US production to other countries.

As to be expected, that has boosted the Japanese Yen and the Swiss Franc, with USDJPY falling to its lowest level since June 11 and USDCHF to its weakest since June 14. Unusually though, the Euro is strengthening too, with the single currency increasingly seen as an alternative haven. In Asia Tuesday, EURUSD reached its highest level since its sharp fall on June 14, when European Central Bank President Mario Draghi signaled the end of ECB asset purchases in December.

EURUSD Price Chart, One Hour Timeframe (June 14-26, 2018)

Latest EURUSD price chart.

Chart by IG

That Euro strength has come despite US President Donald Trump threatening tariffs on EU car imports. Surprisingly, though, there has been no similar strengthening of the Gold price, with the precious metal currently trading at its weakest so far this year.

Gold Price Chart, Daily Timeframe (November 24, 2017 – June 26, 2018)

Latest gold price chart.

Chart by IG

For traders looking for safe assets therefore, Gold appears to be losing its shine, and may continue to do so even if the trade war intensifies further.

More to read on trade wars

China’s Position and Stakes in the Growing Trade War with the US

DAX Price Analysis - Trump’s Trade Wars Pummel Valuations

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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