Last updated on October 20th, 2019 at 11:26 am
The prices of gold recovered on Wednesday, October 16, 2019, after losing almost 1% during the previous session. The yellow metal was lifted by the uncertainty over the Brexit deal. But its momentum was capped by a risk-on-market sentiment.
U.S. gold futures increased by 0.3% to $1,487.90 an ounce while spot prices inched up by 0.2% to $1,484.10 an ounce.
According to Stephen Innes, a market strategist with AxiTrader, the Brexit deal needs to go through a lot to be finalized. He explains that even if the British and European Union (EU) negotiators come up with a withdrawal agreement it would still have to be approved by parliament. Innes adds that if a Brexit agreement is signed then it would raise bond yields which in turn would push gold prices in the near term.
Investors and traders are closely watching the UK and EU talks, but it remains unclear whether the UK can proceed with its planned EU departure on October 31. The disagreements over the terms of the withdrawal agreement have already been significantly narrowed down, according to some officials involved in the talks. However, EU negotiator Michel Barnier warns that if the parties cannot come up with an agreement on Tuesday then it would already too late to send it for approval at the Brussels summit on Thursday and Friday.
Meanwhile, the price movement of the precious metal was supported by new tensions between the U.S. and China. The U.S. House of Representatives passed four measures against China, three of which are related to the Hong Kong protests. The Chinese government reacted and called on American legislators to stop meddling with the Hong Kong issue.
Phillip Futures analyst Benjamin says that the U.S.-China trade negotiations are derailed again, it would push gold prices up. It is currently priced at the $1,474-$1,510 range.
In related developments, the U.S. dollar dropped slightly against six major currencies while the Asian stock markets gained by 0.4% except for Japan.