Though gold prices dropped in the past week, it managed to recover this week as it was being witnessed as a hedge to the trade war. After talk of Beijing’s over President Donald Trump’s impeachment proceedings pricked the prospective U.S.-China trade and further pushed gold prices.
Gold fell last week after Commerce Secretary Wilbur Ross and White House economic adviser Larry Kudlow suggested that the U.S. and China were closing in on a deal, sending all three major stock indexes on Wall Street to record highs.
Gold fell off the more important $1,500 level earlier this month after Federal Reserve Chairman Jerome Powell suggested that the U.S. central bank’s third-straight rate cut of a quarter-point in October would be it’s last for the year
Both bullion and futures of gold recovered from their Friday dip to attempt a return to the $1,480 mark and the bigger $1,500 target as a risk-off mode prevailed across markets. Wall Street indices, however, set new highs after the Trump administration granted a 90-day extension for U.S. companies to continue doing business with Chinese tech giant Huawei.
This week gold opened on a positive note and its after-effects continued to stay on Tuesday. Spot gold prices hit their highest level since November 7 at $1.475.40/ounce.
Gold prices edged up to 1.5-week highs on Tuesday with broader risk appetite dented at least to some extent by doubts over any US-China trade accord, and of course by continued unrest in Hong Kong.
Secretary of State Mike Pompeo said that the US remained gravely worried about deepening violence in Hong Kong and urged the city’s administration to tackle public concerns. It’s possible that a hard line from Beijing against the protesters would make any form of trade deal much less likely.
Furthermore, the trade war concerns continued as there was news in the market that Beijing was pessimistic about a deal and concerned that the US will not roll some tariffs back.
One interesting thing to note is that even though equity markets are at new highs, one can’t just ignore gold and disregard it from its portfolio.
The gold market has suffered because of improving risk sentiment in the marketplace, which has pushed equity markets to new record highs and has also pushed bond yields up.
Though currently, gold seems to be stuck in a new range, any disappointing economic news will bring about a rally in gold prices.
In the last few months, the level of negative-yielding debt in the global market place has dropped from records around $19 trillion to around $12 trillion. But it still is supportive for gold.
In such a situation gold becomes a second income source for the market that is dealing with trillions of dollars in negative debt.
The week is short of scheduled risk events which will, inevitably, leave trade headlines to drive. However early Thursday Asian time will see the release of the Federal Reserve’s last monetary policy minutes, probably the week’s main event
Markets signify that gold may hold $1463 but a possibility of $1480-$1482 looks bright.
In Prithviraj Kothari’s opinion, The gold market has suffered because of improving risk sentiment in the marketplace, which has pushed equity markets to new record highs and has also pushed bond yields up.