Gold firms on US-China trade deal pessimism



Chris Ratcliffe | CNBC

Gold prices firmed on on Monday after CNBC reported Chinese officials are pessimistic about the prospect of a U.S.-China trade deal, following a report of “constructive talks” over the weekend.

Spot gold was steady at $1,466.51 per ounce, while U.S. gold futures were down 0.07% to $1,467.8.

The mood in Beijing about a trade deal is pessimistic due to President Donald Trump’s reluctance to roll back tariffs, which China believed the U.S. had agreed to, a government source told CNBC’s Eunice Yoon.

“Everything looks a lot more positive – U.S. markets are at record highs, trade talks are progressing a little bit slowly, the Fed has (cut) rates three times now – it looks bearish (for gold) compared to the kind of move we’ve seen over the summer,” said Craig Erlam, OANDA senior market analyst. “Trend for gold in the short-term is looking quite negative. From technicals, we have taken out all lows – $1,480 was the most important one, now $1,460.”

Chinese state media Xinhua reported Washington and Beijing had a high-level phone call on Saturday and that the two sides discussed each other’s core issues for the first phase of an initial trade agreement.

European shares edged closer to a record level as optimism around trade talks and a surprise move by China’s central bank in cutting a key interest rate painted an upbeat picture about global growth.

“In all likelihood, a breakdown in trade talks remains the only scenario to breathe new life into gold prices at this time,” Jeffrey Halley, senior market analyst, Asia Pacific at OANDA said in a note.

Market participants now await minutes of the Federal Reserve’s last policy meeting, due on Wednesday, for clues about the future interest rate trajectory. Gold is highly sensitive to interest rates, as lower interest reduces the opportunity cost of holding the non-yielding bullion.

“The scenario is now getting more complicated for bullion, as a new fall below $1,445 would mean much more pressure from bears, creating space for further declines. Only a solid recovery to $1,470 can halt bullion’s current weakness,” Carlo Alberto De Casa, chief analyst at ActivTrades said in a note.

Meanwhile, investors also kept a close eye on developments in Hong Kong, with police on Monday trapping hundreds of protesters inside a major university and demonstrators rampaging through a tourist district, after almost two straight days of standoffs. Gold is considered a safe store of value during times of economic or political uncertainty.

Among other metals, silver was down about 1% at $16.78 per ounce, while platinum slipped 1.2% to $879.00 per ounce. Palladium rose 0.2% to $1,708.00 per ounce.


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