The price of gold remained steady on Monday, influenced by fighting forces of a weaker dollar and positive risk sentiment. While poor manufacturing data for October weakened the U.S. dollar, gains in gold were capped by risk-on market sentiment boosted by optimism that the U.S. and China will sign a trade agreement this month.
U.S. gold futures increased slightly to $1,514.80 an ounce while spot prices were unchanged at $1,512.93 an ounce.
The dollar dropped to 97.218 against several major currencies because of a slowdown in U.S. manufacturing activity. The greenback hit its three-month low of 97.107 three days ago despite the better-than-expected job growth and strong hiring in October. It is soon likely to hit its August low of 97.033. The weak dollar is helping limit the price losses of gold.
American and Chinese representatives in the trade negotiation said they are close to resolving the protracted trade dispute, and hinted that an agreement could be signed within the month.
The positive developments in the trade talks, together with strong U.S. economic data, fueled investors’ interest in risky assets and sent the Asian stock markets to a 14-week high.
According to CMC Markets analyst Margaret Yang Yan, the near-term market sentiment does not look good for gold. But the precious metal still has a positive outlook in mid- and long-term as the U.S. Federal Reserve may reduce interest rates in 2020 ahead of the elections to lift market confidence. The Fed has already cut interest rates three times this year.
Spot prices are likely to test a resistance price level of $1,519 an ounce. A move away from the pricing level may push gold to $1,534 per ounce.
Meanwhile, Mario Draghi has been replaced by Christine Lagarde as president of the European Central Bank. She is scheduled to give her first speech later today. Investors expect Lagarde to maintain her predecessor’s soft monetary policy.