· Gold edged down on Tuesday, ahead of U.S. President Donald Trump’s speech at the Economic Club of New York with investors hoping for positive commentary around China trade talks.
Spot gold fell 0.3% to $1,451.89 per ounce at 0712 GMT, while U.S. gold futures were down 0.4% at $1,451.40 per ounce.
· “Investors are expecting constructive news from Trump after he said trade talks with China were moving along very nicely and as the time for the speech is approaching closer it is impacting gold negatively,” said Argonaut Securities analyst Helen Lau.
Trump’s lunchtime address at the club will be closely watched by investors anxious for any positive news about his administration’s long-running trade war with China.
· Further weighing on the non-yielding bullion, Asian share markets edged higher as investors await the address by Trump, while a slightly higher dollar index against rival currencies also played its part.
· The months-long trade dispute has roiled financial markets and sparked fears of a global economic slowdown, pushing the precious metal, which is considered a safe asset in times of political and economic uncertainty, more than 13% higher this year.
· The United States and China had agreed to roll back tariffs on each others’ goods as part of the first phase of a trade deal, but Trump denied any such agreement over the weekend.
· “New developments in the U.S.-China trade war or any data that point towards inflation rate element will impact gold prices,” said Nicholas Frappell, global general manager at ABC Bullion.
· Last week Chicago Federal Reserve President Charles Evans said that the U.S. economy is in a good place but the path of inflation will be important in deciding the future path of interest rates.
· Spot gold may break a support at $1,455 per ounce and fall into the range of $1,417-$1,440, according to Wang Tao, Reuters market analyst for commodities and energy technicals.
· Meanwhile, in Hong Kong police shot and critically wounded a protester and a man was set on fire on Monday in violence that prompted leader Carrie Lam to denounce “enemies of the people” and drew a chilling warning from a senior Chinese newspaper editor.
The events were an escalation in pro-democracy unrest in the Chinese-ruled territory that has lasted five months.
· Analysts at Morgan Stanley are seen rolling back their calls for higher gold prices in the first half of 2020 on expectations of a US-China trade agreement.
Key Quotes:
“H1 2020 outlook is for 1515 USD/oz.
The risk of gold falling toward its bear case of USD1394/oz in H1 of 2020 if tariffs are rolled back.
Fed to hold through next year …. will pressure haven assets, benefit equities.”
· From a macroeconomic perspective, several of the longer-term problems that would be bullish for gold will likely manifest in 2020, including a recession and an escalation of the trade wars tensions with China, this according to Peter Hug, global trading director of Kitco Metals.
“From a physical perspective, if you’re an investor from a medium to longer term perspective, you just stay with this market and if your holdings are under your percentage allocation that you were looking to apply to your portfolio from the perspective of gold, then you just add to the position at these levels because I think 2020 is going to be a very, very volatile year and I think it’s going to be very positive for the metals,” Hug told Kitco News.
Hug noted that the recent pressure on precious metals can be attributed to selling action from institutional investors following this summer’s rally up to the $1,500 an ounce level.
“Most of the large funds and the ETFs were positioned long…it would be logical that they would sell and take their profits and that’s why you’re seeing this weakness in the market,” he said.
· Elsewhere, palladium inched up 0.5% to $1,696.07 per ounce, having touched its lowest since Oct. 10 in the previous session.
Platinum edged up 0.4% to $879.15 per ounce, while silver fell 0.2% to $16.83 per ounce.
Reference: Reuters, FXStreet, Kitco
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