Sino-U.S. Trade Optimism Hurts Precious Metals Price Action

Sino-U.S. trade optimism boosts risk appetite and helped crude oil price move higher over expectations for increased demand from China while increased risk appetite put a dent on price action in precious metals market.
Colin First
Gold Rises upon Market Uncertainty
Gold Rises upon Market Uncertainty

Precious metals market today suffered sharp loss for the second consecutive trading session as increased risk appetite in the broad market owing to Optimism surrounding Sino-U.S. trade talks. There was slight positive price action when trading activity began for the day owing to a weak US dollar in the broad market following US President Donald Trump’s tirade on strong USD affecting the competitive edge of the US economy and the US Fed being responsible for Dollar’s strength in the broad market. However, the gains were soon erased shortly and the price action of yellow metal saw sharp declines resulting in price in the spot market falling to six-month lows.

Gold Hits Six Weeks Lows On Renewed Risk Appetite

Increased risk appetite owing to Sino-U.S trade talks has already robbed precious metals market of significant profits and fund flow. The continued increase in risk appetite and hopes of a positive outcome between China & the U.S. in their trade talks are likely to continue eating away at profits and redirect fund flow away from precious metals. While cheaper USD is usually a positive factor for Dollar denominated precious metals owing to the cheaper exchange rate for investors who hold other currency and sees increased participation from emerging markets, there is an overwhelming appetite for risk assets in market currently and very little demand for safe-haven assets which is cause for continued decline of price in both spot and futures market.

As of writing this article, spot gold XAUUSD is trading at $1286.67 per ounce down by 0.53% on the day, while US gold futures GCcv1 is trading at $1288.50 per ounce down by 0.82% on the day. Meanwhile, spot silver XAGUSD is trading at $15.16 per ounce down by 0.37% on the day. Crude oil price saw positive price action as optimism surrounding Sino-U.S. trade talks and headlines hinting at positive proceedings in talks between the two nations provided crude oil bulls with fundamental support. China is the biggest crude oil importer in the world and positive outcome in trade talks is expected to boost industrial activity and demand from China causing spike in demand for crude oil. This has led to news which hints at positive progress in trade talks providing crude oil market with bullish price influence. As of writing this article, spot US crude oil WTIUSD is trading at $56.06 per barrel up by 1.01% on the day.

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