Gold Miner ETFs Surge on Renewed Trade Tensions

Gold miner stocks and sector-related exchange traded funds led the charge on Tuesday as gold strengthened on growing global trade tensions and concerns over economic growth.

Among the best-performing non-leveraged ETFs of Tuesday, the VanEck Vectors Gold Miners ETF (NYSEArca: GDXJ) rose 4.1% and VanEck Gold Miners ETF (NYSEArca: GDX) gained 3.0%.

Meanwhile, Comex gold futures were 1.4% higher to $1,408.4 per ounce on Tuesday.

“Gold is being supported by Trump’s comments regarding Sino-U.S. trade tensions and also U.S. threatening with tariffs on European Union goods,” Jeff Klearman, portfolio manager at GraniteShares, told CNBC.

The GraniteShares Gold Trust (BAR) was also up 1.4% on Tuesday.

After his meeting with Chinese President Xi Jinping over the weekend, President Donald Trump commented that any deal with China would have to be “somewhat tilted” in favor of the U.S., adding to uncertainty over a deal any time soon.

Furthermore, Washington threatened tariffs on $4 billion in additional European Union goods in a long-running dispute over aircraft subsidies.

“The trade fiasco could be a positive factor for gold as the deal is still not reached yet,” Carlo Alberto De Casa, chief analyst with ActivTrades, told CNBC. “The stock markets are in the red, which is another positive thing for gold.”

Gold has also found greater support from safe-haven demand and a more dovish outlook from major global central banks, notably the Federal Reserve’s shift toward potential interest rate cuts to combat slowing growth.

“Geopolitical tensions around Iran breaching the 2015 nuclear agreement, which is seen as a provocation by Trump administration, and with market expectation of two or more rate cuts by the U.S. Federal Reserve this year, is helping gold to retrace,” Klearman added.

Looking ahead, lingering trade tensions and the Fed’s monetary policy outlook will remain key factors in maintaining the momentum in the gold market.

“Upcoming U.S. economic numbers and Federal Reserve speakers’ comments are critical as we approach the Federal Open Market Committee meeting at the end of July,” UBS analysts said in a note. “The potential for renewed trade tensions and broader geopolitical risks, in our view, is likely to spur further inflows into gold by financial investors.”

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