Precious Metals Move Down As Sino-U.S Trade War Woes Reignite

Spot Gold moves down on news that the U.S. plans more China tariffs if Trump-Xi meeting fails. Market sentiment is still very cautious.
Colin First

Gold prices fell on Tuesday as the U.S. dollar firmed on renewed fears of intensification in the Sino-U.S. trade war and worries over slowing global economic growth. Investors took cover in the greenback after Bloomberg reported that Washington is preparing to announce tariffs on all remaining Chinese imports by early December if talks next month between U.S. President Donald Trump and Chinese President Xi Jinping fail to ease the trade war.

There is a little bit of pressure from the dollar for now. But, overall gold prices look fundamentally supported. Market sentiment is still very cautious. As of writing this article, XAUUSD is currently trading at $1223.66 an ounce down by 0.46% on the day, while US Gold futures GCcv1 is currently trading at $1225.30 an ounce down by 0.18% on the day. Gold prices have started seeing some strength, unlike the previous two quarters, from geopolitical factors.

Oil Prices Were Dragged Down by Concerns That Sino-U.S. Trade Dispute Will Dent Economic Growth

The dollar is still very strong and may limit the upside in gold prices. But it doesn’t look like gold will lose steam due to the dollar vigor in near future. Gold prices have gained about 6 percent since declining to $1,159.96 an ounce in mid-August, the lowest since January 2017. Choppy sessions in global equity markets last week pushed gold to $1,243.32, its highest since July 17 on Friday. The rally in gold seems to be exhausted near the level of $1,240.

To break this level, it really needs big triggers. It was a correction in the equity markets that provided the recent upside in gold. For gold to breach the resistance around this price range, equity markets need to see a sharp decline or bottom out due to trade war proceedings, which doesn’t seem likely in near future.  So the chance for an upside move in gold is low and highly likely to be capped in mentioned price range if it manages to climb that high despite lack of powerful trigger.

Meanwhile, Spot Silver XAGUSD is trading at $14.43 an ounce down by 0.17% on the day. Brent oil prices dipped on Tuesday, weighed down by ongoing weakness in global stock markets and by signs of rising global supply despite looming sanctions on Iran’s crude exports.

Oil has been caught up in broad financial market slumps this month, with stocks falling again on Monday after reports Washington was planning an additional $257 billion worth of tariffs on Chinese goods if upcoming talks between presidents of US & China fail. There are two downward pressures on global oil demand growth. One is high oil prices, and in many countries, they’re directly related to consumer prices. The second one is global economic growth momentum slowing down. Spot US crude WTIUSD is trading at $66.48 per barrel down by 0.17% on the day.

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