Trade war to impact Africa’s growth as commodity prices remain low

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By Southern Times Correspondent

Over the last few months, the trade war between China and USA has been escalating and this has had a bearing on commodity prices and trade.  

The trade war has raised global uncertainty and has the potential to derail the global growth thrust which has been broad-based. According to a report released by the African Import and Export bank, the actions by the US to redress trade imbalances also hold significant implications for Africa. 

“China and the EU, which are the prime targets of US protectionist policies, are also Africa’s largest trading partners, together accounting for over 44 percent of total African trade in 2017. The impact on Africa could be especially pronounced given that the region has become heavily dependent on China in recent years. 

"For instance, IMF research analysing Africa’s increasing exposure to China has shown that a one percent decline in China’s domestic investment growth is associated with an average 0.6 percent decline in Africa’s growth. The extent seems to be even more pronounced for resource-rich countries, especially oil exporters. 

"Conversely, efforts by the US to redress trade imbalances may also present opportunities for Africa, as manufacturing companies, especially Chinese, could relocate to Africa to take advantage of lower labour costs and preferential access into the US market afforded by the African Growth and Opportunity Act — provided these benefits are retained under the current US Administration,” stated the report. 

On a week to week analysis, the commodity prices for precious metals had been on the down side as the global uncertainties continued. However the prices showed some gains last weeks.

Gold markets fell on Monday 6 August, reaching the $1207 level, before bouncing a bit. On Tuesday 7 August the yellow metal  increased by US$8 or 0.66% to US$1,210.81 an ounce and the price continued on the positive line by adding US$2.11 an ounce or 0.17% to 1,213.36 the following day. Trading Economics analysts expect gold to trade at US$1226.85 an ounce. by the end of this quarter. 

Overally, the precious metal price has been rather negative as it has hovered around the $1213 an ounce level. Some analysts are of the view that the continuous strengthening of the US$ dollar has put more pressure on the gold price  

Silver markets fell hard to open the month at US$15.28 on Monday 6 August the metal price was at  US$15.26 level. Silver increased 0.20 US$ an ounce or 1.32% to US$15.34 on Tuesday August 7 from US$15.26 in the previous trading session and on Wednesday August 8  the metal rose to US$15.39.  The price of silver was expected to trade at US$15.35 US$ an ounce by the end of this quarter, according to Trading Economics' analysts expectations. 

Silver markets pulled back a bit during the trading session on Monday, dropping $0.20 initially, but then found a bit of support near the $15.28 level. There was a significant rally from just under this level and to some extent it is believed that the investors are coming back although silver is a very difficult and expensive market to trade. Investors usually  play the silver market for value but with a low amount of leverage.

Crude oil markets initially surged higher during the trading session on Monday, trying to go higher, perhaps reaching towards a major supply. Crude oil increased 0.33 US$/ per barrel or 0.48 percent to US$69.48 on Tuesday August 7 from 69.01 in the previous trading session. Crude oil is expected to trade at US$69.87 per barrel by the end of this quarter. Analysts are optimistic that the oil price could continue to surge higher, but may face a resistance near the $70 level. However, if the prices breaks above $71,  the price will be predicated to move to the $74 level. 

 

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