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James Hyerczyk
Comex Gold

Gold futures are drifting lower on Tuesday as investors continue to react to the possibility of a near-term trade deal between the United States and China. The news is helping to drive up demand for higher-yielding assets, dampening gold’s appeal as a safe-haven asset. Treasury yields have also been edging higher, making the U.S. Dollar a more attractive asset while pressuring demand for dollar-denominated gold.

At 08:07 GMT, December Comex gold is trading $1455.10, down $1.90 or -0.12%.

Trade Deal Developments

Volume has been extremely low at the start of the shortened holiday week as investors continue to monitor developments on a U.S.-China trade deal.

Gold has been under pressure since Monday’s opening with the selling being driven by upbeat news regarding a possible trade deal.

On Monday, the Global Times, a tabloid run by the ruling Communist Party’s official People’s Daily, said China and the United States are very close to a “phase one” trade deal, discounting “negative” media reports.

China announced on Sunday new guidelines aimed at stopping intellectual property theft, which is seen as the latest positive signal for trade talks. China is seeking to raise substantially the upper limits for intellectual property violation fines.

Additionally, U.S. national security advisor Robert O’Brien said on Saturday that a phase one trade deal with China could happen before the end of the year.

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Strong U.S. Dollar Weighing on Gold Demand

The U.S. Dollar has been well-supported in recent weeks as continued trade-related tensions led investors to back the greenback. Investors view the United States relatively well-positioned to weather a full-blown trade war should there be one. Stronger-than-expected U.S. economic data has also made the U.S. Dollar a more attractive asset.

Speculators raised net long bets on the dollar to a five-week high in the week to November 19, data from the U.S. Commodity Futures Trading Commission showed. Gold is going to have a hard time rallying if investors continue to support the U.S. Dollar.

Daily Forecast

The positive developments over the trade deal should continue to weigh on gold prices throughout the session, but cautious traders could provide support especially as the market approaches its recent main bottom at $1446.20.

Having seen the two economic powerhouses come close to a trade deal in May, just to watch it fall apart, some traders remain skeptical that both parties could pull it off at this time.

Some gold traders are worried that President Trump’s signing of a bill supporting the Hong Kong pro-democracy protesters could irritated China. Others are saying that the implementation of new U.S. tariffs on China on December 15, could bring an end to the talks.

These are gold traders speaking, however. They tend to lean toward the bullish side. Other professional investors appear to be betting on a deal. This is evidenced by the strong demand for risky assets.

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