Gold Falls Over $100 On China Trade Deal 'Agreement' That Wasn't Reached

It was a tough day for the gold futures to start the week on Monday, as they were down over $100 after news of progress on a trade deal with China was announced.

The silver futures continued their divergence from gold, as despite having a mid-day plunge, they remain basically unchanged since the Sunday night open in the Far East.

The big news was the possibility of a trade deal with China. And certainly if you woke up and just saw a headline like this, you would almost think the entire trade war had been resolved.

Although as you’ve probably found out by now, that doesn’t really give the best feel for what actually happened.

From Whitehouse.gov:

So some closer examination of the news makes it seem like this is much more of a temporary pause in doing any additional damage, rather than a productive and conclusive resolution.

Which I personally think has become a much more difficult needle to thread due to the tone of the negotiations.

Because at least based on anything I've ever read, heard, or seen about Chinese culture, it doesn’t seem like they traditionally respond well to being pushed into a corner. And aside from whether you agree or disagree with Trump’s policies, what does seem clear (and is somewhat backed at least by anecdotal reports) is that China can’t be thrilled with the public tone of the negotiations.

Nonetheless, to the degree that the futures can be impacted by headlines like ‘trade deal is reached,’ that did seem to be the driving force behind today’s latest selloff.

Tomorrow we’ll dig into the paper I referenced last week by chairman of Trump’s Economic Council of Advisors Stephen Miran, in that intriguing hypothesis of what the Trump administration and the Treasury may have already been doing in the gold market in recent months.

Keep in mind that Trump named Miran as his nominee for chairman back in December. So in addition to the possibility that the playbook he outlined in his ‘A User’s Guide to Restructuring the Global Trading System’ that he wrote in November of last year, just a month before he was named, it also might be wise to pay attention to his latest views on the trade war.

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His paper has some fascinating ideas in it, and it’s intriguing to think about the discussions going on behind the scenes right now, as we see global market forces pushing us towards a new financial landscape. With the key issue at the heart of it all being how the treasury is increasingly becoming more unable to effectively fulfill its role as the safe haven store of value.

And I’ll look forward to digging into that with you tomorrow.


Sincerely,
Chris Marcus