Gold and Bitcoin Face a Unique Opportunity Amidst the China-U.S. Trade War

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Eleven years have passed since the global economy faced such a massive crisis. Today the prosperity is shaking. One of the most important factors is the looming China-U.S. trade war, which now has gone to the currency war stage. With the massive fiat money printout since 2008, the long term pressure for gold appreciation is growing.

Theoretically, Bitcoin could be basking in glory right now, but the road ahead doesn't look smooth. 

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Just a week ago, Beijing saw the fall of the renminbi to below 7.0 to the dollar. The U.S. Treasury then labeled China as a 'currency manipulator.' Theoretically, this gives Trump a legal right to introduce sanctions against China. Of course, the markets reacted to this seemingly tit-for-tat agenda and thus began a downward spiral.

Thursday saw China buy more renminbi to help its stabilization, which means that China doesn't intend to use currency in the trade war.

Bitcoin is fluctuating and still can go either way if the global economy and currencies go south

As far as being a "currency manipulator," the opposite could be said since China has spent the last five years propping up its currency to stop the economy being dependent on foreign exports. 

What the bigshots say

It is highly unlikely that the WTO or IMF would support the accusation of China being a "currency manipulator." That's why the Trump Administration could be leaving their country open to harmful sanctions if it pursues this. 

If the renminbi is weaker, all trading countries with China become disadvantaged, which means their currencies will become more vulnerable. Then, countries that trade with these countries will have weaker currencies, and so it goes. 

We have already seen New Zealand, Thailand, and India announce cuts in interest rates. 

Bitcoin’s role

Back in the 1930s, when there was a currency concern, people often bought gold. Has Bitcoin taken its place as a haven? Similarly, it's hard to mine, scarce, transferable, and fungible. 

While we could be tempted to say that Bitcoin's price rise on Monday could be due to the news, in reality, Bitcoin's movements have never really correlated with the currency market and the real world.

Gold still has its place

Gold is trending up, but still has a way to go to its all-time heights form 2011

As well as Bitcoin’s rise on Monday, gold also held above $1,500. Spot gold rose 0.57% to $1,505.69 per oz. U.S. gold futures, on the other hand, rose by 0.55% to $1,516.8 per oz.

Carlo Alberto De Casa, an analyst at ActivTrades, commented on Gold “trying to rebound” because of the slowdown fears and the problematic trade talks between China and the U.S. 

The long-drawn dispute recently saw U.S. President Donald Trump declaring that he is not yet prepared to create a deal with China. He went so far as calling into question September’s trade talks. 

It was expected that European stocks would recover on Monday after this second week of losses. Early on, futures deals for the pan-region Euro Stoxx 50 had risen 0.69%, the FTSE was up by 0.58%, and the DAX by 0.6%.

Eugen Weinberg, an analyst for Commerzbank, said: “To achieve higher (gold) prices we need more negative surprises in the economic, financial and geopolitical side. If we don’t see further escalation (in trade tensions), we are likely to see gold prices treading water or come under more pressure.”

Goldman Sachs, on the other hand, said that there were increasing fears of the U.S.-China trade war bringing on a recession. It no longer expects Washington and Beijing to reach a trade deal before the U.S. presidential elections in 2020.

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Other analysts believed that negative debt yields alongside dovish central banks are supporting the bullion further. 

Last week saw gold prices rise by as much as 4 percent, which is an increase of 17 percent this year.

Market focus

The markets are now focusing on Jackson Hole and the annual symposium for the Federal Reserve. Investors seek greater clarity as to the future of interest rates. Traders warn of a 69 percent chance of a rate cut of 25 basis-points this September by the U.S. central bank.

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