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US prepares to impose new tariffs on additional $200B worth of Chinese goods - Chamberlain

US prepares to impose new tariffs on additional $200B worth of Chinese goods - Chamberlain

Release Date:  Friday, July 13, 2018


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Gold and Silver Prices

Gold prices fell and ended at its lowest in nearly a year as the U.S. dollar gained for the week.

"A rising U.S. currency makes dollar-denominated gold more expensive for holders of other currencies, which potentially weighs on demand.

"'When the dollar rises we see gold falling, but when the dollar falls we don't see gold recovering because there is very little appetite for gold at this time,' said ActivTrades analyst Carlo Alberto De Casa. 'Higher interest rates in the U.S. means holding gold costs money.' Gold does not earn any interest or dividends and costs money to store and insure." ("Gold slides to a 1-week low as the dollar climb," Reuters, 07/13/18.)

Gold ended the week down $13.50, closing at $1,241.00. Silver ended the week down $0.23, closing at $15.78.

US prepares to impose new tariffs on additional $200B worth of Chinese goods - Chamberlain

President Trump proposes tariffs on an additional $200 billion of Chinese goods.

"The Trump administration announced Tuesday that it has started the process of implementing fresh tariffs on $200 billion worth of imported Chinese goods.

"The move marked the latest escalation of the ongoing trade war between Washington and Beijing. On Friday, the U.S. slapped 25 percent taxes on $34 billion in Chinese imports, most of them industrial goods that the Trump administration says receive subsidies or other unfair support from Beijing. China quickly responded by imposing tariffs on $34 billion in U.S. products.

"In a statement, U.S. Trade Representative Robert Lighthizer said that the new 10-percent tariffs were in response to what he called China's 'retaliation and failure to change its practices.'

"'This is an appropriate response under the authority of Section 301 to obtain the elimination of China's harmful industrial policies,' Lighthizer added.

"More than 6,031 product lines are affected by the new proposed tariffs, including seafood, fruits and vegetables, grains, tobacco, car rearview mirrors and burglar alarms.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, responded to Lighthizer's announcement with dismay.

"'Although I have supported the administration's targeted efforts to combat China's technology transfer regime, tonight's announcement appears reckless and is not a targeted approach,' Hatch said in a statement. 'We cannot turn a blind eye to China's mercantilist trade practices, but this action falls short of a strategy that will give the administration negotiating leverage with China while maintaining the long-term health and prosperity of the American economy.'

"All told, Trump has threatened eventually to slap tariffs on up to $550 billion in Chinese imports — more than China actually exported to the United States last year — if Beijing won't relent to U.S. pressure and continues to retaliate.

"A senior administration official told Fox News that China has been "non-responsive" to U.S. actions and has insisted that Beijing does not see any way America has been hurt by Chinese policies. The official added that China has warned the U.S. that future actions would be met with "economic attacks" on American markets." ("US prepares to impose new tariffs on additional $200B worth of Chinese goods," Samuel Chamberlain, Fox News, 07/10/18.)

Gold Still Looks Good As The U.S. Economy Starts To Overheat- Axel Merk - Christensen

President and Chief Investment Officer of Merk Investments is a believer in gold for diversification as inflation moves higher.

"Although gold is struggling to attract investors, it is still an excellent alternative in a portfolio as it is only a matter of time before inflation picks up, according to one fund manager.

"In a phone interview with Kitco News, Axel Merk, president and chief investment officer of Merk Investments said that he still likes gold in this environment since he doesn't expect to see a significant rise in real interest rates even as the Federal Reserve keeps pace with rising inflation.

"Merk's comments come as the gold market is attracting some bargain hunters after Wednesday's sharp selloff. While gold has managed to push higher, prices are still hovering near a one-year low.

"'Interest rates are going to move higher but real rates will remain low and I think gold will do just fine in that environment,' he said. 'I still like gold as an important diversifier as inflation moves higher.'

"Although tariffs aren't good, I don't see signs that this economy is going to tip into a recession any time soon. I think this economy is going to overheat," he said. "An important issue though is that people don't know what is going to happen and they don't know how to invest in the long-term."

"As to what will eventually drive investors back to gold, Merk said that it will be a sharp downturn in equity markets, which he sees coming as the Federal Reserve raises interest rates.

"'What is going to drive gold is rising inflation that is going to force the Fed to raise interest rates faster than expected, which will break the back of the S&P 500,' he said. 'Higher interest rates are the way many expanding economies have died.'

"Merk added that it isn't just gold that is struggling in this environment. He explained that all significant safe-haven assets like U.S. Treasuries, the Swiss franc, and the Japanese yen have all failed to catch a bid in the current market environment.

"'When the S&P 500 keeps going up and up, investors don't feel the need to have diversified safe-haven," he said. "[But,] the need to diversify is the greatest when investors don't think they need it.'" ("Gold Still Looks Good As The U.S. Economy Starts To Overheat," Interview with Axel Merk, Neils Christensen, Kitco News, 07/12/18.)

Ryan Says Trump's Trade Policies Put U.S. Economy at Risk - Edgerton

Paul Ryan does not agree with President Trump's proposed tariffs.

"House Speaker Paul Ryan drew a stark difference between his vision for trade and that of President Donald Trump, rejecting tariffs and warning that pulling out of trade agreements is a threat to the U.S. economy.

"'We risk having American products locked out of new markets, jobs moved overseas, and a decline in American influence,' Ryan said Thursday at the Economic Club of Washington. 'As our generals will tell you, these agreements are just as important for our national security as they are for our economy.'

"Ryan of Wisconsin, who plans to retire after this year, questioned Trump's decision to pull out of Trans-Pacific Partnership, a multinational agreement to cut trade barriers. Ryan said the pact's "broader intent was correct," to counter China's influence in the region and encourage development according to the U.S. model..."

"Ryan said 'bad actors' like China commit trade abuses, as Trump has asserted, but that new tariffs 'are not the solution.'
"Trump announced tariffs on steel and aluminum and this week the administration said it would impose a new round of 10 percent tariffs on $200 billion of Chinese goods as part of a dispute over alleged Chinese theft of U.S. intellectual property. Ryan hasn't advocated any legislation to reverse the tariffs.

"'The rule book for the global economy in the 21st century is being written now...' Ryan said. 'We must continue to demonstrate that our way of doing things still has juice.'" ("Ryan Says Trump's Trade Policies Put U.S. Economy at Risk," Anna Edgerton, Bloomberg, 07/12/18.)

Mark Mobius warns that the trade war is a prelude to the next financial crisis - Langlois

Veteran investor believes the worst damage to the markets is yet to come.

"'There's no question we'll see a financial crisis sooner or later because we must remember we're coming off from a period of cheap money. There's going to be a real squeeze for many of these companies that depended upon cheap money to keep on going.'

"That's the latest warning issued by veteran investor Mark Mobius, who told Bloomberg in an interview Wednesday that the worst may be yet to come in the wake of Trump's latest round of tariffs on Chinese goods.
"Mobius is looking for another 10% drop in emerging-market stocks and, ultimately, a financial meltdown at home and abroad.

"He says tensions between the U.S. and China will increase...The inflationary impact, Mobius explains, will be matched by rising wages at a time when unemployment is low.

"The good news for bulls is that the 81-year-old investor, who left Franklin Templeton Investments earlier this year to start his own company, predicts the damage to markets will eventually prove to be a buying opportunity for savvy investors..." ("Mark Mobius warns that the trade war is a prelude to the next financial crisis," Shawn Langlois, MarketWatch, 07/12/18.)

Case for $2,000 Gold Price Gets Strong; Peak Gold Could Be Near - Zulfiqar

Peak gold could raise gold prices to $2,000 an ounce quickly and we seem to be near.

"It may be a great time to be a gold bull; gold prices could be setting up to soar immensely.There's a basic economic reason behind this; there's only a limited amount of gold in the ground.

"We could be reaching a point where there isn't much of the precious metal left in the ground to be discovered, and production is declining. In other words, we might be reaching peak gold.

"... major miners are actually looking for gold around the world, so they have a much better idea than most about what's happening.

"Consider what Ian Telfer, the chairman of Goldcorp Inc. (NYSE:GG), said about gold discoveries and production in the coming years.

"'If I could give one sentence about the gold mining's that in my life, gold produced from mines has gone up pretty steadily for 40 years,' said Telfer in a recent interview. 'Well, either this year it starts to go down, or next year it starts to go down, or it's already going down.' (Source: "'We're right at peak gold': All major deposits have been discovered, declares Goldcorp chairman," Financial Post, May 16, 2018.)

"Telfer ended with, 'We're right at peak gold here.'

"Goldcorp isn't the only major mining company saying that we could be nearing peak gold.

"As I said earlier, peak gold is when production of gold declines, be it due to low gold prices, fewer discoveries, and so on and so forth. In simple words, it's a major supply constraint.

"Dear reader, this is happening around the same time that the demand for the yellow precious metal remains solid.

"We currently have central banks wanting more gold. They have been a consistent, big gold buyer for a while now. And it doesn't look like they are going to step back anytime soon.

"Central banks are buying the yellow metal because gold reduces volatility in their foreign exchange reserves. Obviously, don't expect them to announce when they will be buying gold, and how much; just look at their actions. Judging by their actions, central banks have been loud and clear that they don't care about the price gold is trading at; they just want to buy it.

"In addition to this, we see high demand for gold in countries like India and China. There's also increased investment demand...

"Looking at everything, it seems like a perfect storm could be brewing in the gold market that could send gold prices soaring immensely. Peak gold could make $2,000-an-ounce gold a reality much sooner than expected." ("Case for $2,000 Gold Price gets Strong; Peak Gold Could Be Near," Moe Zulfiqar, Lombardi letter, 07/13/18.)