The prices of gold fell on Monday, November 18, 2019, as investors’ optimism on Phase 1 of the U.S.-China trade deal recovered following reports of constructive discussions during the weekend. Further losses of the precious were limited by a softer U.S. dollar which has slightly weakened against most of the major currencies.
U.S. gold futures were down by 0.4% to $1,462.90 an ounce while spot prices dropped by around 0.3% to $1,463.40 an ounce.
The Xinhua News Agency reported that American and Chinese representatives to the trade negotiations had a high-level telephone discussion regarding their main concerns about the first phase of the agreement.
According to Geojit Financial Services’ head of commodity research Hareesh V, the outcome of phase one is very important because it could serve as the basis for the later phases of the agreement between China and the U.S.
The optimism in the Sino-U.S. trade talks has significantly affected the precious metal as it lifted the markets’ risk sentiment in Asia, said CMC Markets analyst Margaret Yang Yan. OANA Asia Pacific senior market analyst Jeffrey Halley added that it appears at this time that gold prices can only recover if the trade talks fail.
Meanwhile, the Chinese central bank has implemented an interest rate cut for the first time in four years. The move helped the Asian stock markets recover from early losses as investors anticipate more economic stimulus from the government.
Aside from the trade deal, investors are also monitoring political developments in Hong Kong and the release of the minutes of the U.S. Federal Reserve’s meeting later this week to get clues on interest rate direction. These two are very important for the gold market as the precious metal is considered a safe-haven asset during times of political and economic uncertainty and is very sensitive to interest rates.
On the technical aspect of trading, Reuters’ technical analyst Wang Tao believes that the neutral price level for spot gold is in the $1,462-$1,472/ounce price range. If spot gold breaks the $1,472 level then it could reverse the near-term bearish sentiment.