Tension Surrounding Sino-U.S. Trade Negotiations Underpin Demand For Safe Haven Assets

Demand for safe-haven assets is expected to remain steady across the week owing to investors caution surrounding Sino-U.S. trade talk proceedings and global growth worries.
Colin First

Precious metals continue to trade positive on prevalent risk-averse trading activity in the broad market. Safe haven demand has been relatively high across the week since investor sentiment took a dovish turn on global growth worries. Demand for safe-haven assets has been boosted further since American market hours yesterday as conflicting headlines relating to Sino-U.S. trade talks increased investor caution in the broad market. News hit market that Trump administration had denied a request from China for preparatory talks later this week ahead of next week’s high-level talks between Chinese Vice Premier Liu He and top U.S. officials set for Jan. 30-31 which caused equities to decline also resulting US Greenback losing value in the broad market.

Crude Oil Price Trades in Green on News of Increased Fiscal Spending in China

However, the news was shortly followed by comments from Larry Kudlow, head of the National Economic Council, who denied reports of rejecting Chinese request for preparatory talks. Given recent headlines from the U.S. which is seeing a lot of conflicting details published in regards to Sino-U.S. trade negotiations and owing to fact that key issues remain unaddressed between two parties, investors are highly cautious about placing major bets in risk assets ahead of talks at month end. Given escalating political and economic tensions across all major global markets, precious metals are expected to continue seeing steady demand owing to safe haven status for rest of the month. As of writing this article, spot gold XAUUSD is trading at $1286.19 per ounce up by 0.18% on the day while U.S. gold futures GCcv1 were trading at $1285.10 per ounce up by 0.13% on the day.

Meanwhile, spot silver XAGUSD is trading at $15.42 per ounce up by 0.64% on the day. Crude oil rebound post yesterday’s 2% decline in value as conflicting headlines on Sino-U.S. trade talks hinted that U.S. officials are still open to negotiations despite lack of progress in key issues. Further sentiment surrounding crude oil was boosted as Chinese finance ministry officials commented earlier in the day that the government would step up fiscal spending this year to support its economy which is interpreted in broad market as hopes for steady demand of crude oil in China, the biggest importer of crude oil. While the price action still remains near previous session lows both spot and futures market for oil is seeing positive price momentum in today’s trading session. Spot US Crude WTIUSD is trading at $52.83 per barrel up by 0.19% on the day.

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