The dollar is once again being favoured during the escalation of the trade spat, as yields on US Treasuries continue to head lower.
Whether this is a sign of Treasuries being the preferred safe haven during the stock market sell-off or a belief that the US will be least worse off, it’s very much consistent with what we’ve seen previously.
What’s more, it’s making life tough for the other traditional safe haven, gold. While the yellow metal typically performs well during periods of risk aversion, it also responds strongly to movements in the greenback and is therefore being dragged lower recently by movements in the currency. Gold is trading back below $1,280 today putting the focus back around the $1,265 lows of the last couple of months.
One bullish case for gold at the moment is that it performed well during the fourth quarter after a stuttered start, perhaps that’s what we’re seeing now. The recent trend isn’t particularly favourable though and if $1,265 breaks, it may signal that this time is different. That’s obviously a big “if” for a level that’s currently being strongly defended.
