Last updated on October 20th, 2019 at 11:10 am
The price of gold were down slightly on Wednesday, September 25, as some investors and traders went into profit-taking mode. But the outlook for the bullion remains positive because of the launch of a formal inquiry into the possible impeach of U.S. President Donald Trump.
U.S. gold futures dropped by 0.2% to $1,536.60 an ounce. Spot prices also lost 0.2% to $1,529.14
Democratic House Representatives have already launched a formal inquiry into Trump’s impeachment. He is accused of seeking foreign assistance to start a smear campaign against Joe Biden who will be running against him in the presidential election in 2020.
According to AxiTrader market strategist Stephen Innes, the political turmoil is compounding the effects of macroeconomic weakness. The situation could lower the valuation of the U.S. dollar and negatively affect the stock markets, which would raise the prices of gold.
Another factor that may push gold prices is the weak data on consumer confidence in the U.S, which has intensified fears about a global economic slowdown.
Ilya Spivak, a DailyFx senior currency strategist, explains that the weak consumer data boosted the demand for non-interest-bearing assets such as gold. This is because it lowered Treasury yields and encouraged expectation for the possible interest rate cut.
On the trade front, Trump has criticized the trade practices of China at the United Nations General Assembly. Concerning the ongoing trade negotiations, he said a “bad deal” would never be acceptable. Trump’s statement was inconsistent with the actions taken by China to grant his request to increase Chinese purchases of American agricultural products. Despite Trump’s harsh words, the two parties are still scheduled to meet again in October for another round of trade talks.
Reuters’ technical analyst Wang Tang suggests that it is likely for spot prices to reach more than $1,546 an ounce since the precious metal has already surpassed the resistance pricing level at $1,524.