Major gold ETFs and stocks lost their shine today as trade tensions thawed between the U.S. and China.
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The SPDR Gold Shares ETF (GLD) was down over 3% in pre-market trading with the VanEck Gold Miners ETF (GDX) melting nearly 5%. Newmont Mining (NEM) was down over 5% and Barrick Mining (B) off 4.8%.
Trade Breakthrough
The drops came as the gold price fell around 3% in early trading to just over $3,200 though it stabilized later in the day.
That was driven by the weekend announcement that the United States had reached a preliminary trade agreement with China following negotiations in Switzerland. It also emerged today that the world’s two largest economies had agreed to drastically reduce tariffs on imported goods from the other country for an initial period of 90 days.
U.S. tariffs on Chinese goods will fall to 30% from 145% and Chinese duties on U.S. imports will fall to 10% from 125%.
The news calmed investors fears over a protracted trade war between the U.S. and China and a slip into a global recession. Buoyed investors once again parked their assets into equities with stock markets bouncing and the U.S. dollar strengthening.
Gold Price Slide
The gold price has hit record highs over $3,000 in recent months as it is traditionally seen as a safe haven in turbulent times for nervous investors.
The GLD has jumped 28% in the last six months with the GDX soaring 41%, not just boosted by tariff uncertainty but analysts suggesting that the gold price could soon go as high as $4,000.
However, the trade breakthrough may mean some recalibration.
“Obviously, the overall continued uncertainty in regards to tariffs remains probably the most significant underpinning behind gold,” said David Meger, director of metals trading at High Ridge Futures.
“In the near term, gold will possibly continue to decline as the dollar could appreciate and amid reducing geopolitical risk the haven demand too may drop hence, the yellow metal may decline to $3,200 in the near term,” Jigar Trivedi, senior commodity analyst at Reliance Securities, said, as quoted by Reuters.
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