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RBC: Trump's Tweets on Fed, Tariffs Sway Gold Prices

RBC: Trump's Tweets on Fed, Tariffs Sway Gold Prices
Dmitry-Rukhlenkodreamstime

By    |   Wednesday, 25 September 2019 09:18 AM

President Donald Trump’s tweeting about the Federal Reserve, trade and tariffs has influenced gold prices, RBC analysts say.

While Trump has basically never directly tweeted about the yellow metal, gold has been on a strong run in 2019, rising 16.5%, CNBC.com explained.

Previous studies have found Trump’s social media feed influencing the market’s rate expectations. Low rates can mean higher inflation, which benefits gold, experts say.

“While negative sentiment towards the Trump-driven conversation around China, trade, and the Fed does not bear statistical significance for gold prices, in our view it does present event risk,” RBC commodity strategist Christopher Lourney said in a note to clients.

The analysis does not quantify a specific dollar amount, but Lourney notes that “spikes in negative conversation volume have tended to precede the majority of upward moves in gold prices since late 2018.”

The uncertainty associated with Trump’s policies and his subsequent tweeting present “uncertainty” in trading, meaning there can be “more frequent moves in gold prices, particularly amid the most recent rally,” Lourney said.

“We view the Trump-driven conversation around the Fed as a key possible source of uncertainty,” Lourney said.

Gold held near a three-week peak on Wednesday as an impeachment inquiry into Trump raised political uncertainty in the world's largest economy, triggering a broader sell-off in equity markets, Reuters reported.

Spot gold was at $1,530.10 per ounce at 1127 GMT, little changed from the previous day, when it hit its highest since Sept. 5 at $1,535.60.

U.S. gold futures eased 0.2% to $1,537.30.

Democrats in the U.S. House of Representatives on Tuesday launched a formal impeachment inquiry into Trump, alleging he sought foreign help to smear Democratic rival Joe Biden ahead of next year's election.

"Gold is holding on to the gains from yesterday because of announcements which seem to have hit the dollar and risk appetite," said OANDA senior market analyst Craig Erlam. "(That) is almost perfect for gold."

"We're going to have a lot of commentary over the coming days which is going to play in risk appetite," he added.

The impeachment threat increased the prospects of prolonged political uncertainty, driving investors out of assets seen as riskier, with world stocks falling to a two-week low.

Gold is considered a safe store of value during times of political and financial uncertainty.

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President Donald Trump’s tweeting about the Federal Reserve, trade and tariffs has influenced gold prices, RBC analysts say.
trump, tweet, gold, prices
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2019-18-25
Wednesday, 25 September 2019 09:18 AM
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