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James Hyerczyk
Comex Gold

Gold is trading lower on Tuesday, but rebounding from early session weakness that drove the market to $1536.40, just slightly above the top of a value zone we had identified as an attractive area for buyers.

Earlier in the session, gold prices fell to their lowest level in nearly two weeks amid increased appetite for risky assets in response to stronger-than-expected China economic data and the signing of the preliminary U.S.-China trade deal on January 15. Gold was also pressured by the news that the U.S. was removing China’s label as a currency manipulator.

At 10:05 GMT, February Comex gold is trading $1545.50, down $5.10 or -0.33%.

US Removes China from Currency Manipulator List Ahead of Trade Deal Signing

The United States removed China from a list of countries considered currency manipulators just two days before top trade negotiators for Washington and Beijing sign a key “phase one” trade deal, the Treasury Department announced Monday.



China’s Dollar-Denominated Exports and Imports Beat Expectations in December

China’s dollar-denominated exports and imports were both higher in December, Reuters reported citing data from the General Administration of Customs.

In December, dollar-denominated exports rose 7.6% on-year, against a 1.3% drop in November. December imports were 16.3% higher from a year ago, Reuters reported citing data from the Chinese customs. Economists polled by Reuters had expected dollar-denominated exports to rise 3.2% on-year and imports to rise 9.6% in the same period.

Daily Forecast

A slight dip in U.S. Treasury yields is likely behind the mild turnaround in the gold market. At the same time, firmer U.S. equity markets and a steady U.S. Dollar may be capping gains. However, technical chart-watchers coming in at $1536.40, just slightly above the 50% level at $1533.20 should also be considered as a reason behind the intraday rebound.

Fundamentally, the key event today is the release of the report on U.S. consumer inflation. The Consumer Price Index is expected to have risen by 0.3% and Core Consumer Inflation is expected to have risen by 0.2%.

“Core CPI should remain solid in the next few months and easy base comparisons should support the YoY reading,” Credit Suisse wrote in a note to clients January 9. “With the December tariffs on consumer goods cancelled and limited wage pressure, we don’t expect a meaningful break higher in core inflation. The FOMC are likely to be more sensitive to downside surprises in the months ahead, given persistent below-target inflation and falling inflation expectations.”

Steady-to-better inflation data is likely to keep a lid on gold prices, while weaker-than-expected figures could encourage some short-covering. The movement in gold will be determined by how investors feel the Fed will react to the data.

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