The prices of gold held steady on Monday after the U.S. and China finally agreed on an interim trade deal last week. This phase one agreement led investors back to riskier assets, though the losses of the precious metal were checked by the softer U.S. dollar.
U.S. gold futures dropped by 0.2% to $1,478.80 an ounce while spot prices declined by 0.1% to $1,474.46 an ounce.
The phase one agreement, which put on hold the implementation of a new round of tariffs on Chinese goods scheduled yesterday, also lifted the Asian stock markets.
It was reported that China agreed to import billions of dollars of farm products from the U.S. in exchange for the suspension of tariffs on its U.S. exports. U.S. Trade Representative Robert Lighthizer said the agreement will almost double American exports to China in the next two years. The world’s two largest economies are expected to sign the phase one deal in the first week of January.
According to Benjamin Lu, an analyst with Phillip Futures, the agreement switched the markets into a risk-on mode and is negatively affecting the precious metal. However, he doesn’t expect gold prices to slide too much because there are still some lingering political and economic risks. In addition, the bullion is still somewhat supported by the weakness of the greenback.
AxiTrader market strategist Stephen Innes added that the agreement fails to meet market expectations. As such, it may not be able to produce significant recovery in terms of investments or exports or completely revitalize business confidence. He also said that investors and traders are now likely to focus on phase two of the U.S.-China agreement. And gold will benefit from the trade tensions associated with the second phase of the negotiations.
On the economy front, U.S. retail sales in November grew less than expected and this is attributed to consumers’ reduction of their discretionary spending.
Meanwhile, speculators have lowered their bullish stance in COMEX gold contracts for the week which ended on December 10.