Many different factors can determine the future market direction of gold and other commodities. The current geo-political tension between China and the US is likely to trigger another price increase in the coming weeks and months.
US-China Relations Sour
It is a well-known fact that the US and China don’t see eye-to-eye on a lot of things. These differences were apparent even before COVID-19 broke out, and things have not improved since. In fact, the political tensions between both countries are flaring once again.
This week, the Chinese government wanted to introduce a new security law. It would criminalize political dissent in Hong Kong. As most people are aware, the China-Hong Kong issue has been going on for years, yet has escalated in the past 18 months.Most of the mainstream media outlets have seemingly ignored this topic, but that may not be the case for much longer.
US Senators, on the other hand, introduce a new bill to sanction Chinese officials and organizations enforcing this new law in Hong Kong. This news shows that the tensions between both regions is bound to escalate in its own regard, and potentially cripple the global economy as a result.
Making matters even more interesting is how the US Senate approved a bill that directly affects Chinese companies. More specifically, Chinese companies will face a tougher time if they want to be listed on US stock exchanges. It is not unlikely that similar restrictions for US stocks being traded in China will come to pass at one point.
What All of This Means for Gold
During times of uncertainty, precious metals tend to become more popular, and by default, rise in value. This is especially visible when looking at the prices of both gold and silver.
With tension between the US and China flaring once again, a capital flight into gold is a plausible scenario. The price of gold is also holding its own relatively well despite the coronavirus pandemic. All of these factors hint at a higher price level waiting to be achieved.
Combined with lower interest rates, quantitative easing, geopolitical uncertainty, and investors bailing on traditional stocks and oil, a powder keg is waiting to explode. The current financial situation cannot be sustained for much longer, thus opting for investments in gold and silver is the most viable course of action.