US-China Trade Dispute

President Trump and China are working to negotiate a trade deal. China especially wants to end the trade war with the US., while Trump seems to be in no hurry. The US and China must agree to a deal before December 15th to avoid further tariffs. An additional 15%, to the tune of $156 billion, could be taxed on Chinese imports. This trade war impacts China in two ways. The first is a slow-down of its economy, not seen in over three decades. The second is that China’s communist policies include the promise of a better life. A slow economy challenges those powerful beliefs. 

“As long as… Trump does not make a clear statement about what he wants; the markets will remain puzzled” states research analyst Peter Fertig. 

Trade Deal

The US-China trade deal would remove any of the tariffs on Chinese goods (currently about $360 billion worth). It would also stop the additional 15% tariff starting on December 15th. Sources believe Trump wants China to agree to a trade deal that would help American manufacturers, American Farmers, and technology firms. 

Hong Kong Protests

The US-China trade dispute wears on, and China is pretty ticked off at the US. Recently, Trump signed two bills into law to protect human rights. The first bill authorizes sanctions on Hong Kong and Chinese officials who participate in human rights abuses in Hong Kong. This has escalated tensions in Beijing. China’s Foreign Ministry stated that the bill “seriously interfered with Hong Kong affairs… China’s internal affairs and … violated international law.” The second bill bans the sale of violent crowd control measures like rubber bullets and tear gas to Hong Kong police.

How the Trade Deal and Hong Kong bills affect Gold and Palladium 

Gold has seen a 14% increase this year. Many analysts attribute some of the gold price increase to “safe haven” buying after Trump signed the bills affecting Hong Kong and China. Additionally, China and India gold imports are falling because of a slow-down in the economy. The slow Chinese economy could see slower gold consumption for years to come, affecting the gold price overall. Gold Chinese Panda

Another thing affecting the gold price is a weaker US dollar. Gold has historically risen in value as paper currency falls. Analysts and investors such as Goldman Sachs are predicting the weaker dollar to happen over the next year or two, which will show positive for gold. Additionally, even though gold consumption is low in India and China, Eastern European leaders are resuming a high interest in it.

Meanwhile, palladium continues to rise. Analyst Giovanni Staunovo states that “…mine supply and growing demand should send palladium into its ninth straight year” of growth. 
Palladium Eagles

Palladium to Gold Ratio

Currently, the palladium-to-gold ratio is slightly on the bullish side, where palladium rises 1x over gold. The gold to palladium ratio showcases the current state of the precious metals market and determines the current strength of gold (divide the gold price by the palladium price). When the ratio is low, it often means that gold is undervalued to palladium. When the ratio is high, the opposite occurs.

Palladium to gold ratio
Chart from Kitco

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