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James Hyerczyk
Comex Gold

Gold prices are edging higher on Monday, underpinned by lower Treasury yields and lower demand for stocks. Thin trading conditions due to the U.S. bank holiday could also be influencing the price action. Furthermore, a weaker U.S. Dollar is also driving up demand for dollar-denominated gold. There is also some evidence of safe-haven buying with Treasury futures, the Japanese Yen and gold trading higher. This is being fueled by escalating violence in Hong Kong.

At 12:53 GMT, December Comex gold is trading $1464.20, up $1.30 or +0.09%.

Gold posted its biggest one week loss in three years last week after U.S. Treasury yields soared to their highest levels since August 1. A de-escalation of recession fears was primarily behind the move. Investors were liquidating Treasury bonds, sending rates higher, and moving their proceeds into higher-yielding equities.

Trade Deal Worries

One catalyst providing support for gold is renewed concerns over U.S.-China trade relations after President Trump appeared to downplay reports of an imminent lifting of tariffs in a protracted trade war between the two economic powerhouses.

CNBC is reporting that Trump said on Saturday that trade talks with China were moving along “very nicely” but the United States would only make a deal with Beijing if it was the right one for America.

Trump also said there had been incorrect reporting about U.S. willingness to lift tariffs as part of a “phase one” agreement, news of which had boosted markets.

Citi analysts said in a note, “We expect a high degree of uncertainty to remain even if a tariff rollback is achieved,” explaining that investment and financial frictions between the world’s two largest economies are likely to continue.

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Violence in Hong Kong Escalates

Protests in Hong Kong took a violent turn Monday, heightening an already volatile situation days after a group of pro-democracy lawmakers was arrested in the city, according to CNBC.

In one incident, a Hong Kong protester is in critical condition after being shot by police. In another incident, police said a group of protesters poured flammable liquid on a man and set him on fire.

The latest mass demonstrations come after three pro-democracy lawmakers were arrested on Saturday and reports indicated that others were warned they could soon be taken into custody.

Hong Kong stocks tumbled Monday, with the Hang Seng index falling more than 2 percent. Mainland China companies comprise about half of the firms listed on the exchange, according to the latest figures from the CIA World Factbook.

Daily Forecast

Gold seems to be ripe for a short-covering rally after last week’s steep loss. Today’s news events may be just enough to chase a few of the weaker short sellers out of the market. Furthermore, with the Treasury market closed today for U.S. Veterans Day, yields are falling, making the U.S. Dollar a less-desirable asset, while driving up demand for dollar-denominated gold.

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