After holding above its 200-day moving average, gold finally closed above both its 100-day and 50-day moving averages, presenting a buying opportunity. As a result, gold immediately shot up almost 3% last week, closing at $1,344.90 per ounce. Prices are now poised to challenge the high for the year, which is $1,369 per ounce (see the following chart).
This all happened as President Trump threatened to impose tariffs on Mexico unless it began helping to stem the flow of migrants crossing the U.S.–Mexico border. Fortunately, this trade war ended before it began. The U.S. and Mexico brokered a deal late last week in which Mexico agreed to send additional troops to its own southern border and “increase participation in a Trump administration program called the Migrant Protection Protocols, in which some migrants are sent to wait in Mexico while their asylum claims in the United States are processed,” according to The New York Times.
However, the trade wars with China and Iran continue. As mentioned previously in this column, while it’s impossible to predict when geopolitical events will shake equity markets, a diversifying position in gold can take some of the “bite” out of equity market losses and preserve capital in a portfolio.
Rick Andrews is president of Avant Capital Management