Mexico Tariff Threat Cause Gold & Silver Prices to Rise

On the 6^th May we produced a podcast video entitled ‘Does Politics Matter’ where we responded to the fact that the previous day to that President Trump said on Twitter the US would more than double tariffs on $200bn of Chinese goods on the following Friday and introduce fresh tariffs.

Stock markets including the Dow Jones plummeted to as low as 471 points down (almost 1.8%) on the news, in early trading. We saw gold immediately jump $10 and silver 4 cents, as it was feared and reported that the Chinese trade talks due that week would be called off.

We concluded the podcast with the following words:

“So, whether you are a gold and silver bull or bear, its worth at least taking into account, not just technical and fundamental analysis but also political considerations too – which is why to a large degree most of our forecasts have been more accurate than not.”

Now to be really honest we were somewhat disappointed by the number of views that youtube video received – just a little over 700.

The reason being, is that with this particular President in the White House, politics perhaps matter more than at any other time, and as our subscribers and members purchase gold and silver for themselves, and other precious metals for both insurance and potential investment purposes, we cannot over emphasise enough, the importance that politics play on the prices of these pieces of metal you and we both hold particularly over the short term. (For those interested we have placed a link to that podcast below).

This morning is another great example where politics matters:

In a tweet this morning, US President Donald Trump has announced that from 10th June, a 5% tariff would be imposed on all goods coming from Mexico, unless it curbs illegal immigration into the US. In addition, this 5% would slowly rise “until the illegal immigration problem is remedied“.

The President said it was necessary, in order to tackle what he claimed was a crisis at the US southern border; for as recent as yesterday US border authorities in El Paso, Texas, said a group of more than 1,000 migrants were detained the previous day – the largest single group agents had encountered. Border agents say they are overwhelmed, although some critics say they are mishandling and mistreating migrants.

Now the purpose of this article is not to comment on the accuracy or the decision-making process per se regarding immigration, but to note the reaction to the tweet.

Already this morning most European, Asian, Middle Eastern & African stock markets are down from 0.55 – 1.5%, The Dow, Nasdaq and S&P 500 are all down over 1% with the Dow currently standing at 24,867 down some 293 points.

Gold has jumped some $16 to $1304 since this morning, and silver which has performed terribly this week has recovered some 23 cents since its week’s low at $14.53.

In our weekly update tomorrow we shall comment further, but for now even Republicans are criticising the President for using tariffs as a weapon on immigration issues; but in fairness to him there is the argument that Mexico has done very little to prevent the rising tide of immigrants congregating at the Southern Border, and therefore something has to be done.

It is too early to tell how this will impinge upon the trade agreement between the US and Mexico, and we are aware that officials from the Mexican Government are headed towards Washington currently – though the President won’t be there this weekend.

What is for certain Politics does matter, and political decisions do have an impact. Just look at the BREXIT fiasco in the UK for example, where gold is now standing at £1030 up £30 so far this week and up over 21% since the original Brexit Referendum when in US dollar terms its up only some 2% during the same period.

We have little doubt that this tariff weapon the President is using will continue to cause market volatility and he sees it as a potent weapon. So, don’t be surprised if we see higher gold prices in the short term which will then likely fall back quite rapidly once these issues have been settled or resolved – of course working on the basis that they will be.

What are your views?

Does Politics Matter Video: