· Gold prices pared early losses and edged higher on Monday, as the dollar weakened and investors sought more clarity on the "phase one" trade deal between the United States and China.
Spot gold rose 0.2% to $1,477.73 per ounce, by 0641 GMT. U.S. gold futures gained 0.1% to $1,482.10.
Gains in bullion were limited as equities rose after the world's top two economies announced a "phase one" trade agreement and suspended some tariffs on each other's goods that were due to go into effect on Sunday.
· "We still don't know what is in the deal ... most of the traders had already discounted this news in the last couple of weeks, as it has been in the market that the phase 1 deal will happen," said Hareesh V, head of commodity research at Geojit Financial Services.
"Also, the dollar is slightly negative, so these are the reasons that we haven't seen a drastic sell-off in gold."
The dollar index fell 0.2% against a basket of rivals, making gold cheaper for holders of other currencies.
· U.S. Trade Representative Robert Lighthizer on Sunday said U.S. exports to China will nearly double over the next two years, although officials are yet to decide a date to sign the agreement.
· "The phase one deal fell short of market expectations and is probably not enough to fully restore business confidence or generate a meaningful recovery in exports or investment," AxiTrader market strategist Stephen Innes said in a note.
"Traders have now turned focus to the long and arduous road to a phase two trade deal. So gold could do well on escalating trade tensions."
· Gold prices have risen 15% this year on the backdrop of the months-long tariff war and its impact on the global economy.
· "Gold prices are not going to slide as the global growth is not super positive, there are still some risks," said Phillip Futures analyst Benjamin Lu, adding prices will range between $1,400-$1,450 an ounce in the short term.
Data from U.S. showed on Friday retail sales increased less than expected in November as Americans cut back on discretionary spending despite a strong labour market.
· Speculators slashed their bullish positions in COMEX gold contracts in the week to Dec. 10.
· Market anxiety has alleviated slightly as trade tensions between the U.S. and China have eased and the political outlook in Britain has stabilized, but one market analyst said that gold will remain on investors ’ radar as uncertainty is not going away in 2020.
A phase one trade deal, no new tariffs on Chinese imports, and a solid majority victory for Boris Johnson ’s Conservative Party in the U.K. has reduced some fears in the marketplace, but will still impact investor sentiment in 2020, George Milling-Stanley, chief gold strategist at State Street Global Advisors, said in an interview with Kitco News.
“Basically this phase one deal will bring trade negations back to neutral territory,” he said. “The real issues are far from resolved and that will continue to add uncertainty to financial markets and that will be good for gold.
“Trade tensions have eased but they are far from gone,” he added.
Looking at the U.K., Milling-Stanley said that although Johnson now has a majority to push through Brexit, investors still don ’t know the impact of leaving the European Union will have on the economy.
Milling-Stanley added that there is still plenty of support for gold in 2020 and he sees the yellow metal embarking on a long-term sustainable rally in a new era of uncertainty. For next year, Milling-Stanley said that he sees gold prices trading in a range, between $1,450 and $1,600 an ounce.
Although the Fed has signaled that it is on hold for 2020, Milling-Stanley said that he is not convinced they will be able to maintain a neutral stance in the face of global economic weakness.
However, he added that even if the Fed does raise interest rates next year on improving economic conditions, the impact on gold would be limited.
· Elsewhere, palladium rose 0.7% to $1,944.03 an ounce. The autocatalyst metal had climbed to a record high of $1,979.95 in the previous session on supply concerns.
Silver gained 0.7% to $17.05 per ounce, while platinum rose 0.5% to $932.62.
Reference: Reuter, Kitco
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