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James Hyerczyk
Comex Gold

Gold futures finished higher last week despite the announcement of the U.S.-China trade deal and the positive outcome of the U.K. General Election that lifted some of the uncertainty over global economic growth. Traders said the Fed’s dovish tone, the weaker U.S. Dollar and worries over President Trump’s impeachment provided most of the support.

Last week, February Comex gold settled at $1481.20, up $16.10 or +1.10%.

The Trade Deal

U.S. President Donald Trump and Chinese officials said Friday that they have agreed to a “phase one” trade deal that included cutting American tariffs on Chinese goods.

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Election Victory for Britain’s Brexit-backing Conservative Party

U.K. Prime Minister Boris Johnson’s Conservative Party won a commanding majority in the country’s general election, granting Johnson the power to drive through his Brexit deal and take the U.K. out of the EU before the January 31 deadline. The result was the party’s biggest election win since 1987.

Fed Leaves Rates Unchanged, Indicates No Changes Through 2020

Earlier in the week on Wednesday, the Federal Reserve held interest rates steady following its two-day meeting this week and indicated that no action is likely next year amid persistently low inflation.

Weekly Forecast

Gold prices could pick up some support this week if investors continue to remain cautious about the trade deal between the United States and China. “Although there seems to be some progress, the lack of details is causing a lot of concern that we’re not far long in the trade deal as people would like and as a result we are getting flight to safety,” said Jeffrey Sica, founder of Circle Squared Alternative Investments.

Gold could also get a boost on the back of uncertainties surrounding the U.S. political outlook. A Democratic-controlled U.S. House of Representatives committee approved charges of abuse of power and obstruction against Republican President Donald Trump on Friday, making it almost certain he will become the third American president in history to be impeached.

Gold traders should also pay attention to the price behavior in the U.S. Dollar after the greenback plunged against a basket of currencies on Friday as news of an initial China-U.S. trade deal and an election victory for Britain’s Brexit-backing Conservative Party appeared to clear the fog on the global investment horizon, hurting safe-haven demand for the greenback.

The major report this week is Monday’s Flash Manufacturing PMI. It is expected to come in at 52.6. A weaker than expected number could boost gold prices if it triggers a drop in demand for risky assets and Treasury yields.

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