– Market turmoil as trade war concerns deepen and Trump appoints war hawk Bolton

– Oil, gold and silver jump as ‘Russia China Hawk’ Bolton appointed

– Oil up 4%, gold up 2.2% and silver up 1.6% this week (see table)

– Stocks down sharply – Nikkei down 4.5%, S&P 4.3% & Nasdaq 5.5%

– Bolton scares jittery markets already shell-shocked by US’ tariffs against China

– Currency wars and trade wars tend to proceed actual wars

– Gold now outperforming stocks year to date (see table)

Editor: Mark O’Byrne

1 Week Relative Performance (Finviz.com)

Gold and silver have gained another 1% today as market turmoil deepens on concerns about global trade wars and actual war after the appointment of uber hawk John Bolton as national security adviser.

In response to increasing economic and geo-political risks, key stock market indices have fallen sharply this week as investors again diversify into the safe havens of gold and silver. At the time of writing the Nikkei is down by 4.5%, the S&P by 4.3% and Nasdaq 5.5%. Gold and silver have climbed by over 2.2% and 1.4% respectively this week (see table above).

Gold is now outperforming stocks year to date (see table below).  Year to date, gold is 2.5% higher while stocks have now turned negative and some are down very significantly for the year. The S&P is down 2%, the DJIA 4%, EuroStoxx 8.4% and the Nikkei 10% year to date (see table below).

Gold is again acting as a good hedge – exactly when investors need a hedge. We are in an environment of increasing and heightened uncertainty – conditions in which safe havens thrive.

 

America is on a path to war. Currently it’s a trade war, predominantly with China, but collateral damage is already showing itself. China has responded with its own tariffs whilst EU leaders are today meeting and trade is at the top of their agenda.

The appointment of war hawk Bolton has also confirmed Trump’s instinct to be aggressive in what are currently simmering geopolitical tensions – namely with Russia, Iran, North Korea and the “Elephant in the room,” America’s hegemonic rival China.

The appointment of “chicken hawk” Bolton has delivered further blows to both political establishments and fragile markets which were already nervous following tariff announcements.

As history clearly shows trade wars, currency wars and economic and geo-political sabre-rattling frequently lead to actual wars. Markets do not tend to like such conditions and they frequently result in sharp market corrections (especially in stock markets), in bear markets in stocks and indeed in financial crashes.

 

Finviz.com

Trade War breaks out

Yesterday President Trump instructed Trade Representative Robert Lighthizer to place tariffs of $50 billion on Chinese imports. Beijing said they would fight any such move “to the end” and announced tariffs of $3 billion.

The restrained reaction from China suggests that there are likely to be further counter-reactions on the way. As we have found with the PRC’s dealings with the Trump administration, they like to take their time.

In the early hours of this morning Beijing called on the United States to “pull back from the brink”. In a statement the Chinese commerce ministry said:

“China doesn’t hope to be in a trade war, but is not afraid of engaging in one.”

At present there is a temporary stay-of-execution for the European Union and other nations in regard to the tariffs, making the focus on China perfectly clear. The lingering threat that controls could be implemented in a matter of months has alarmed leaders. Those in the EU have pushed trade talks to the top of their agenda, for today’s meeting.

According to Reuters, ‘The European Commission has proposed that, if tariffs are imposed, the bloc should challenge them at the World Trade Organization, consider measures to prevent metal flooding into Europe and impose import duties on U.S. products to “rebalance” EU-U.S. trade.’