Last updated on October 20th, 2019 at 11:22 am
The prices of gold fell for the third consecutive session on Monday, October 14, 2019, because of optimism on the possible resolution of the U.S.-China trade war. Gold prices were affected by the increase in risk appetite and the increase in the valuation of the U.S. dollar.
Spot prices dropped to $1,486.91 an ounce. But U.S. gold futures gained by 0.2% to settle at $1,491.20 an ounce.
U.S. President Donald Trump has already canceled plans to increase tariffs on Chinese goods and has described the phase one of the trade deal with China. This is the most significant action taken by both parties since the trade dispute started in January 2018.
The positive news on the trade negotiations lifted the stock markets in the Asia Pacific region by 0.5% except for Japan, according to the MSCI index.
According to OANDA analyst Jeffrey Halley, there was very limited detail on the progress of the trade talks but it was enough to boost risk appetite. He explains that the yellow metal appears to be moving based on developments in the trade talks and is less affected by market fundamentals.
OCBC Bank adds that while the effect of the trade talk news on gold prices was already observed in April, it could be different this time. The two parties appear to be willing to proceed with the negotiation without ruing what they have already accomplished so far.
Meanwhile, the Monetary Authority of Singapore has eased its monetary policy to boost economic recovery. The island city-state was greatly affected by the protracted U.S.-China trade war and almost went into a recession.
Aside from the U.S.-China trade talks, investors and traders are also waiting for the outcome of the talks between Great Britain and the European Union. Britain is scheduled to leave the Union on October 31, but both parties admitted that they are unlikely to reach an agreement before Britain’s departure.
Benjamin Lu, an analyst with Phillip Futures, is optimistic about the outlook of the bullion. There are still several risks that pose a threat to the global economy and these may force central banks to ease monetary policy.