Trade War Uncertainty?
Although the stock market seems to be on auto pilot these days, there was a slight setback in the pre-market Tuesday morning. Equity futures had given up all of its add-on gains from Monday’s torrid session when news hit the tape of escalating trade tariffs between the US, with both China and South Korea. “Is a trade war beginning” the markets wondered? With this news, the S&P futures (ES) dropped -13.00 full points, nearly all of them in a straight line. The market recovered rather quickly, but let’s have a look into what’s brewing between these countries.
Late Monday president Trump announced tariffs against products coming from China and South Korea. The affected items are not huge areas of business, but the markets were concerned that this could be the beginning of something much larger. The US imposed a 30% tariff on solar imports to the US from China and approved safeguard tariff action on imported washing machines from South Korea. Naturally, this resulted in immediate condemnation of the move from both countries.
LG Electronics felt the brunt of the 30% increased tariffs as its stock slid 5% when the news came out. Could this escalate to more important industrial sectors like electronics, or automobiles? Will other countries be singled out soon by the Trump administration? When will China and South Korea retaliate with import tariffs again US goods entering their countries? These are important questions because if a real trade war is starting, prices will start rising on everything. And what does that mean?
Inflation is on the rise. The last CPI report (Consumer Price Inflation) showed the year-on-year increase was already at 2.1%. The Bloomberg Commodity Index is +7% in just five weeks and oil futures are up 50% since last June…just seven months ago. And what performs well during times of uncertainty and inflation? Gold and silver. Even if you have a Gold-IRA or were thinking of starting one, silver can be added to it, which makes a great compliment to any gold investment.
In addition to gold’s potential to rally in an inflationary move, silver has an excellent technical set-up for the same. Precious metals analyst Samson Li writing in Thomson Reuters on January 2, 2018 offers this insight in the current technical trading position for silver:
Technically, silver is ripe for a major breakout to the upside in 2018. The CFTC figures Managed Money positions show that COMEX silver has been in a net short for three straight weeks since 12th December. This is not unheard of but is relatively rare for silver; the last time COMEX silver was net short was between the end of June and the first week of August 2015.
As investment sentiment can swing from one extreme to another, and given silver’s innate volatility, this net short position should point to the possibility of a sharp short-covering rally. Looking back at the corresponding period in 2015, silver price was trading at $15.61/oz on the 7th July, and it was the third consecutive week recording a net short position. Approximately a year later, silver was trading over $20/oz in July 2016…
[T]he current poor sentiment does suggest that silver could be one of the better performing precious metals in 2018, barring any crisis that could trump most of the commodities but gold.
During these uncertain times everyone needs to protect their wealth. What’s more, protecting one’s wealth in a GOLD IRA is the best decision. Don’t let uncertainty and inflation rob you and your children of their future.
Open an account with Tradition Gold today.