· Gold prices edged lower on Thursday, as optimism over a preliminary trade deal between the United States and China increased risk appetite, although concerns about tariffs and unresolved core issues remained.
Among other precious metals, palladium scaled a record high, while platinum jumped to its highest in nearly two years.
Spot gold fell 0.2% to $1,552.22 per ounce by 0619 GMT. U.S. gold futures eased 0.1% to $1,552.60.
· The much-awaited Phase 1 trade deal was signed by U.S. President Donald Trump and Chinese Vice Premier Liu He on Wednesday, defusing an 18-month-long row that has roiled global markets.
News in mid-December that a deal would be forthcoming had sparked a strong rally in riskier assets.
· “We are seeing a slight pullback in gold prices as the markets are relieved that a first phase of the trade deal is signed,” said Ajay Kedia, director at Kedia Advisory in Mumbai.
Further weighing on gold prices, world stocks scaled record levels on Thursday as investors cheered the trade deal.
· However, analysts said the deal failed to address structural economic issues that led to the conflict, did not fully eliminate the tariffs that have slowed the global economy, and set hard-to-achieve purchase targets.
· “Some people are disappointed because Trump didn’t gain much from the deal, compared to the huge uncertainty that he imposed on the U.S. economy, farmers and workers,” said Margaret Yang Yan, a market analyst at CMC Markets.
Bullion, considered a safe asset in times of political and economic uncertainty, gained 18% last year on the back of the tariff war and its impact on global economy.
· “No question the detente is favourable for risk, but the agreement won’t change the Federal Reserve’s outlook and if anything, it could lead Chair Powell to cut rates as the economic impulse from the Phase 1 deal could be meek,” Stephen Innes, a market strategist at AxiTrader, said in a note.
On Wednesday, the Fed expressed confidence that borrowing costs are at the right level to sustain growth and lift inflation to healthier levels.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
· Holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust rose 0.43% to 878.32 tonnes on Wednesday.
· Gold Price Analysis: Flag breakout suggests scope for a rise to $1,562
Gold is again looking north and could challenge resistance at $1,562.
The yellow metal 0.64% and closed at $1,556 on Wednesday, confirming a bull flag breakout on the daily line chart.
The pattern indicates the pullback from recent highs has ended and the rally from lows below $1,450 observed in December has resumed.
The flag breakout has opened the doors for a convincing move above the recent closing high of $1,573. However, on the way higher, the yellow metal will encounter resistance at $1,562 (Jan. 10 close).
· Palladium was up 0.3% at $2,270 an ounce after hitting a record peak of $2,288.12 earlier in the session.
Platinum was down 0.6% to $1,013.82 after hitting its highest since January 2018 at $1,027.44 earlier, while silver shed 0.6% to $17.88 per ounce.
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