Price of Gold Fundamental Daily Forecast – Underpinned by Trade Deal Concerns, Capped by Demand for Risk

Gold is trading slightly higher on Monday shortly before the regular session opening as investors pore over the trade deal between the U.S. and China, while hoping for more clarity from both economic powerhouses.

Keeping a lid on prices are rising Treasury yields and demand for risky assets. However, a weaker U.S. Dollar is providing some support for the dollar-denominated asset.

Stronger-than-expected economic data from China is also at the forefront. Later today, the focus will shift to a key manufacturing report from the U.S.

At 12:22 GMT, February Comex gold is trading $1480.60, down $0.60 or -0.04%.

Trade Deal Recap

U.S. and Chinese officials announced on Friday that the two economic powerhouses had reached a phase one agreement after a combative 18-month trade war.

U.S. Trade Representative Robert Lighthizer said on Sunday that the phase one U.S.-China trade deal reached on Friday is “totally done,” and it will nearly double U.S. exports to China over the next two years.

Solid China Factory, Retail Sales

Growth in China’s industrial and retail sectors beat expectations in November, as government support propped up demand in the world’s second-largest economy and amid easing trade hostilities with Washington.

Daily Forecast

Although the trade deal is being perceived as positive, there are some concerns being raised by analysts. This is helping to contribute to today’s cautious trade in the financial markets. These worries may be helping to underpin gold prices. Goldman Sachs is one major investment firm that is not so happy about the deal.

As part of the limited deal, the U.S. said it will maintain 25% tariffs on approximately $250 billion of Chinese imports while reducing tariffs on $120 billion in products to 7.5%. The rollback in duties is “smaller than expected,” according to Goldman’s chief economist Jan Hatzius.

“The reduction is only half as large as our baseline assumption,” Hatzius said in a note. “There is still some uncertainty regarding the status of this agreement, as it appears once again that some technical and legal details are still in flux.”

Furthermore, “Neither U.S. nor Chinese officials have been specific about what the reforms are, nor has there been any detail provided regarding the size of Chinese agriculture purchases from the U.S.,” Hatzius said.

These uncertainties if shared by other investors could be enough to underpin gold prices on Monday.

In other news, later today, investors will get the opportunity to react to the latest data on the Empire State Manufacturing Index, Flash Manufacturing PMI, Flash Services PMI and the NAHB Housing Market Index.