China and Taiwan: How They Impact Gold Prices

The price of gold tends to surge when there is an economic issue, government issue, or other crisis between countries. The crisis between China and Taiwan is proving that history repeats itself, and this is no different. If you’re unsure of what is happening between China and Taiwan and how you can prepare for what’s to come, this blog is for you. Keep reading to learn more about the tension between China and Taiwan, how gold is affected, and why investing in gold is the best move you can make now.

What is Happening with China and Taiwan?

According to the Council on Foreign Relations, Taiwan has been governed independently of China since 1949, but Beijing views the island as part of its territory. Beijing has vowed to eventually “unify” Taiwan with the mainland, using force if necessary. Tensions are rising. Taiwanese President Tsai Ing-wen, whose party platform favors independence, has rebuked Beijing’s efforts to undermine democracy. Beijing has ramped up political and military pressure on Taipei. Some analysts fear the United States and China could go to war over Taiwan. U.S. House Speaker Nancy Pelosi’s trip to the island in 2022 heightened tensions between the countries.

The United States’ chief goal is to maintain peace and stability in the Taiwan Strait, and it has implored both Beijing and Taipei to maintain the status quo. Washington says it does not support Taiwanese independence.

Through its policy of strategic ambiguity, the United States has for decades attempted to maintain a delicate balance between supporting Taiwan and preventing a war with China. But President Joe Biden has seemingly rejected the policy, stating several times that the United States would come to Taiwan’s defense if China attacked. White House officials have walked back his comments, saying the policy has not changed, but ultimately, the president gets to decide how to respond. Several members of Congress and some experts, including CFR President Richard Haass and Research Fellow David Sacks, have welcomed Biden’s statements, arguing that China’s increased aggression necessitates clarity. Other experts have disagreed with this position.

How is Gold Affected by China and Taiwan?

Here’s what’s been happening with gold:

• Gold (XAU/USD-Spot) made a 4-week high around 1795.29 Thursday on escalating China-Taiwan military tension and hopes of a Fed/Powell pause.
• Gold was already buoyed after Fed’s meeting on 27th July, in which although Fed hiked +0.75% as unanimously expected, the market presumed by Powell’s Q&A talks that Fed may slow down or even take a pause in September, November, and December.
• Details of Powell’s presser (Q&A) and subsequent statements by various Fed policymakers show that Fed is on the way to hiking either +0.75% or +0.50% in September, depending upon the inflation trajectory for August and September.
• Further Fed may hike @+0.50% in November and December if the inflation trend stays at the current level; otherwise, Fed may continue to hike @+0.25% if inflation cools down meaningfully or @+0.75% if it boils further.

What Should I Do to Prepare?

When it comes to preserving your retirement, savings, and the value of your money, the best thing you can do during a time of crisis between two countries is to invest in gold. The stock market, real estate, and other investments will likely lose value during a recession. However, the value of gold always tends to go up when the value of the dollar goes down. As such, diversifying your portfolio with gold will allow you to maintain value within your accounts and ensure that you will always have something to depend on.

In preparation, you can also roll over your IRA to a Precious Metals IRA. By rolling over your IRA, 401(k), 403, TSP, or 457 Plan into our Precious Metal IRA Account, you can achieve the same profits that you would gain by purchasing gold or silver directly while also enjoying the benefits that your retirement account provides.

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