· Gold prices inched lower on Friday in range-bound trade, pressured by increased risk appetite on hopes of an interim Sino-U.S. deal being signed soon, while investors awaited U.S. GDP data release for fresh cues.
· U.S. Treasury Secretary Steven Mnuchin said on Thursday the United States and China would sign their so-called 'Phase one' trade pact at the beginning of January, adding that it would not be subject to any renegotiation.
Spot gold fell 0.1% to $1,478.33 per ounce by 0451 GMT and was set to gain for the fifth straight quarter. U.S. gold futures were down 0.1% to $1,482.70 per ounce.
· "The real driver for gold markets has been trade war risk and with its de-escalation in phase one on the back of Mnuchin's comments is not bullish for gold," said Stephen Innes, a market strategist at AxiTrader.
China's Finance Ministry unveiled a new list of import tariff exemptions for a duration of one year starting Dec. 26 for six chemical and oil products from the United States.
· Investor demand for gold was further pressured as Asian shares firmed ahead of the holiday season, holding close to 18-month peaks. The dollar was steady, even as it gained for the first week in four, supported by better-than-expected U.S. economic data.
The initial jobless claims report was strong with applications for unemployment benefits slipping from a more than two-year high, while factory activity data for the Mid-Atlantic region was almost flat in December.
· "Prices remain exposed to further upside risk in 2020," Standard Chartered Bank analyst Suki Cooper said in a note.
"Key factors to watch for gold next year will be the second phase of the U.S.-China trade negotiations, the U.S. election, global monetary policy, and the investor response to these developments."
· Meanwhile, in Britain, Prime Minister Boris Johnson promised to "get the Brexit vote wrapped up for Christmas", following his landslide election victory.
· Investors now await U.S. gross domestic product data due to be released later on Friday.
· Elsewhere, palladium rose 0.4% to $1,944.44 per ounce. Prices of the autocatalyst metal had hit an all-time peak of $1,998.43 on Tuesday on a sustained supply crunch.
· Silver was flat at $17.06 per ounce, while platinum edged up 0.1% to $934.39.
· Gold looks set to post double-digit yearly gains, having hit six-year highs in September.
The yellow metal is currently trading at $1,478 per Oz, representing a 15 percent gain on a year-to-date basis.
That is the biggest yearly rise since 2010 when prices had rallied by 29.6 percent. Also, the metal had risen by 13.21 percent in 2017.
Gains powered by dovish Fed
Gold has put on a good show this year primarily due to Federal Reserve's actions. The central bank took a dovish u-turn in the first quarter and delivered three rate cuts in the second half.
Also, the central bank has expanded its balance sheet by over $300 billion in the last three months. Expansionary monetary policy usually bodes well for gold, a zero-yielding safe haven.
Also, the US-China trade war and the recession fears added to the bullish tone.
Looking forward
Some experts believe gold will likely have a tough time next year, as the Fed has paused rate cuts and with elections in November, there is a strong incentive for President Trump to de-escalate trade tensions.
· Gold and Trump’s Impeachment
If you asked any gold trader nearly four years ago, what would you do if newly elected President Trump was impeached, they probably would’ve said, “Buy gold.” Well, maybe they did because gold is not going down. However, it’s not going up either. It’s just stuck in an elongated price range that could be an indication of accumulation. We don’t know.
If investors were concerned about President Trump being removed from office then Treasurys and the Japanese Yen would be skyrocketing, and gold would be right behind. So we know the support for gold isn’t coming from safe-haven buying.
· Gold prices may have bottomed, and it’s only a matter of time before the next leg-up in prices take effect, this according to Gary Wagner, editor of TheGoldForecast.com.
“This is an extremely, extremely good year for the price of gold,” Wagner told Kitco News. “That being said, I believe right now we have been forming a base, roughly around $1,450.”
Wagner noted that gold prices could rally another 15% from current levels.
“I’m looking for $1,650 to about $1,700 or $1,690 as the next conclusion of a rally that has really begun over the last couple of weeks,” he said.
An interesting phenomenon that we may see is a positive correlation between gold prices and equities if the Federal Reserve takes an even more dovish stance.
“When the Federal Reserve steps in and either cuts interest rates or has an accommodative monetary policy because in that particular instance, we will see, as a net result of that both equities and gold running higher based upon Fed action,” he said.
Reference: Reuter, FXStreet,Kitco
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