Spot gold was up 0.1% to $1,528.10 per ounce, as of 0347 GMT.
Gold prices on Monday surged to their highest in more than six years, surpassing the $1,550 mark in early trade, before paring gains after Washington and Beijing indicated a possible thaw in their trade spat.
· The non-yielding bullion is often seen as a safer investment during times of political and financial uncertainty.
U.S. gold futures were up 0.1% to $1,538 an ounce.
· “Prices are steady because of the conciliatory tone both China and Trump sounded yesterday; the market started to hope that there is some deal coming out of the trade dispute,” said Helen Lau, analyst, Argonaut Securities.
Lau added that hopes for monetary policy easing by central banks across the globe provided some support for the bullion.
· On Monday, U.S. President Donald Trump on Monday flagged the possibility of a trade deal with China, and said he believed Beijing was sincere in its desire to reach an agreement.
· Chinese Vice Premier Liu He, who has been leading the talks with Washington, said on Monday that China opposed any escalation in trade tensions.
· Global markets had been roiled at the start of the week by new tariffs from the world’s two largest economies.
· However, underscoring the possibility of further sudden U-turns and keeping gold from diving further, just on Sunday the White House had said Trump regretted not raising the tariffs on China even more.
· “More cynical heads are clearly ruling the gold market at the moment, and are refusing to listen to the short-term noise from the White House,” OANDA analyst Jeffrey Halley wrote in a note.
· On the technical side, spot gold may peak in a range of $1,546-$1,568 per ounce, as suggested by its wave pattern and a projection analysis, according to Reuters technical analyst Wang Tao.
On the back of widespread risk-on sentiment, the benchmark 10-year U.S. Treasury yield pulled back from a three-year low, which it reached on Monday.
· Higher bond yields increase the opportunity cost of holding bullion, and also supports the dollar.
· The dollar index, which measures the greenback’s value against a basket of six major currencies, rose about 0.5% overnight.
· The markets are also fully priced for a quarter-point cut by the U.S. Federal Reserve in rates next month, and over 100 basis points of easing by the end of next year.
· Gold stays firm near $1527 amid traders’ indecision
Gold refrains from carrying the previous pullback from multi-year highs as it takes the bids to $1,527 during the early Asian session on Tuesday.
Moving forward, traders will keep an eye over the economic calendar having some second-tier data from Germany and the US while also emphasizing on the trade war headlines.
Technical Analysis
Unless trading successfully below monthly low surrounding $1,481, any decline is considered a pullback towards March 2013 top near $1,617.
· Gold reaching fresh six-year highs overnight is a sign that it could be ready to hit $1,600 soon, according to FXTM. “Gold … benefited from the escalated tensions hitting a new 6-year high and seems to be heading towards $1,600,” writes FXTM chief market strategist Hussein Sayed. The new trigger for gold came on Friday when markets shifted their attention to the U.S.-China trade war as both countries hit each other with new tariffs.
· “For 2020, we don’t expect a material improvement in the outlook for global trade and in the global economy. We think most of this will already be reflected in silver prices though,” said ABN Amro senior FX and precious metals strategist Georgette Boele. “With silver prices following gold prices in an environment of weak economic fundamentals, gold prices will likely outperform silver prices.”
Next year will likely see more global monetary policy easing and negative yielding debt, which are two very important triggers for gold and silver prices.
Despite a precious metals bull-run this summer, silver’s 10% gain has been disappointing due to gold’s strong outperformance, added Boele.
“The deterioration on global growth and global trade has dampened silver prices. However, recently there has been a catch-up,” she wrote. “In the near term, we expect silver prices to decline.
· Technicals: Us bulls could not ask for anything more from Gold last week. The battle was won at 1498.6-1500 upon a test each day of the week and once price action gained out above 1513.5-1516.7 and extended through 1520.8 it did not look back. The tape must hold out above 1530-1531.2 in order to keep this wave alive and drowned out the disappointing reversal from last night’s highs.
Bias: Bullish/Neutral
Resistance: 1588.2***
Pivot: 1546.1
Support: 1530-1531.2***, 1525**, 1516.7-1518.8**, 1498.6-1500**, 1484.5-1487.2***
· Elsewhere, silver was flat at $17.64 an ounce, and platinum too was unchanged at $855.
· Palladium fell 0.2% to $1,470.20 per ounce.
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