What Would Happen to Gold if China Attacks Taiwan?
Updated
Since last week the media has published videos and Chinese politicians' statements about the Chinese military drills near Taiwan. Taiwan has also conducted military exercises and preparatory work with the civilian population in the event of an attack. On August 3, the NYT, quoting Chinese state media, published an article about the following Chinese military drills scheduled on August 4 and a place of exercises. Chinese media offered five swaths of the sea surrounding Taiwan. If true, it can be a hostile act, possibly igniting conflict between China and unrecognized Taiwan. Both countries are essential for the world economy, meaning the conflict would affect markets. I hope it will not happen. However, this risk urged me to start a series of posts 'What would happen to asset_name if China attacks Taiwan?'
A brief: China is the second economy in the world by nominal GDP. China is the top producer and buyer of gold in the world. It is the sixth largest gold holder, owning 1948 MT at the end of Q1 2022.
A possible conflict would drive the gold price to break the last resistance of 11790/OZ t and move to the middle of the May-June range to 11840/OZ t in the short term. The longer the conflict exists, the more sanctions I expect. I can't predict how long Taiwan can fight and what sanctions will be imposed. If the conflict lasts several months, developed nations could prohibit Chinese gold, as they have done with Russian gold. You could see it as a bullish sign. However, China could probit gold imports. The action will decrease demand and weigh on the price.
The position holding period is 7 days to next Thursday. Unfortunately, I do not see a good level for stop-loss. If the bad doesn't happen, it is better to close the long. However, we do not know the date. Solely China knows the exact date if the plan exists. The risk could realize during the next 7 days or be postponed to next month or even later. If the risk realizes later, I expect the same effect on the gold price, and only target adjustments could be needed.
I wish you peace!
Thank you for your reading, and have profitable trading! Comment your thoughts!
A brief: China is the second economy in the world by nominal GDP. China is the top producer and buyer of gold in the world. It is the sixth largest gold holder, owning 1948 MT at the end of Q1 2022.
A possible conflict would drive the gold price to break the last resistance of 11790/OZ t and move to the middle of the May-June range to 11840/OZ t in the short term. The longer the conflict exists, the more sanctions I expect. I can't predict how long Taiwan can fight and what sanctions will be imposed. If the conflict lasts several months, developed nations could prohibit Chinese gold, as they have done with Russian gold. You could see it as a bullish sign. However, China could probit gold imports. The action will decrease demand and weigh on the price.
The position holding period is 7 days to next Thursday. Unfortunately, I do not see a good level for stop-loss. If the bad doesn't happen, it is better to close the long. However, we do not know the date. Solely China knows the exact date if the plan exists. The risk could realize during the next 7 days or be postponed to next month or even later. If the risk realizes later, I expect the same effect on the gold price, and only target adjustments could be needed.
I wish you peace!
Thank you for your reading, and have profitable trading! Comment your thoughts!
Order cancelled
China said it concluded drills yesterday, so I canceled the geopolitical idea. I estimate that the long-term risk of the event exists.Trade closed manually
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