19.06.201914:13 Forex Analysis & Reviews: Will gold win the trade war between the US and China?

According to experts, the value of gold can rise to $ 1,400 per 1 ounce this year in a situation of trade opposition. The rise in the price of the yellow metal is also influenced by geopolitical and economic uncertainty about the prospects for the global economy. Also, the American economy is less susceptible to the negative impact of the trade war than the Chinese but Bank of America believes that the longer it lasts, the bigger the consequences will be.

At the beginning of this month, the US regulator lowered the forecast for US GDP growth for the current year from 2.5 to 2.4%. According to the US Central Bank estimates, the country's GDP growth will not exceed 1.5% in 2020, which is 1.8% lower than the previous forecast. This is the second downward trend in worsening US economy, analysts warn.

Bank of America is confident that the introduction of tariffs has a negative effect on the welfare of the economy, which imposes them. "The annual increase in tariffs in the United States is an extremely deflationary fact, which provokes macroeconomic threats." The increase in tariffs on imported products from China adversely affects the demand from American consumers. According to experts, these tariffs grew on average by 4.4%, which is the highest figure since 1973. Experts warn that a full-fledged trade war can raise tariffs on all imported products to 13.8%.

In September of this year, Bank of America predicts a decline in interest rates by the Fed. The second reduction is expected in December and the third in early 2020. Experts suggest a decrease of 75 basis points (bp) early next year.

If such a scenario is implemented, low-risk assets, such as gold and US Treasury bonds, will undergo a significant revaluation. Note that the price of the yellow metal remains high at the moment, showing the best weekly result this year.