There has been a lot of talk recently about the effects of import tariffs on markets around the world, with the US beginning what seems to be a strongly protectionist policy. Other countries have followed by imposing what could be called retaliatory tariffs, and the future of where this process will lead to is at this point uncertain. However, if it comes to an international trade war, it looks like gold and silver could be the real winners.
The Rise in Gold and Silver
Already, it can be seen that gold is benefitting from this unrest in our global markets. In fact, in just one day – March 23 – gold rose 1.4% and 1% in spot markets. On that same day there was also movement in the iShares Gold Trust ETF (IAU) and iShares Silver Trust (SLV), rising 1.4% and 0.91% respectively. And these movements reflect a trend that continues to this day, as investors scramble for the safety of traditional favourites in an uncertain and often unpredictable world.
A Possible Boon for Investors
This surge in the popularity of gold and silver could spell opportunity for experienced investors, especially if they keep on top of the market with a trading specialist like Oanda. There is also the potential to benefit from changes in the forex market, because each new tariff creates a ripple effect throughout the world’s currency exchanges.
The Fall in the Dollar
As mentioned above, with every new tariff there is a knock-on effect across the world’s markets. This could be as small as a ripple – or it could spell a wave of change. For example, after the recent tariff impositions from the US government there was a fall in the dollar. By investing in the forex market you could put yourself into a position to benefit from correlated events like these. And this could be a good way to hedge against other investments you may have in precious metals.
However, it should be noted that, according to Warren Buffet, diversification is not always a good idea. He goes on to say that you should choose the right news to focus on and not put too much faith in every new headline. With this in mind, it could be worth taking the news of an impending trade war with a pinch of salt.
There are many market factors that affect the prices of precious metals and of currencies, and to focus on just one – in this case, tariffs – could be detrimental. Markets change constantly, for myriads of reasons, and it is impossible to tell what is around the corner.
Tariffs could multiply across the globe. Or, they could be dropped completely as governments change and trade policies are modified. The only certainty is that there is no real certainty. At least, that’s the long-term outlook. But in the short term it certainly appears that trade tariffs will be the rule rather than the exception, and the prominence of gold and silver seems to be assured – at least, for now.