Gold risks back-to-back losses, slipping from 6-year high

Gold futures fell early Thursday and may be heading for back-to-back losses after the haven metal scored a nearly six-year high early in the week.

The impending sideline meetings at the Group of 20 conference in Japan between U.S. President Donald Trump and his Chinese counterpart Xi Jinping held the attention of financial markets, which had been supportive for gold in recent sessions.

August gold GCQ19, -0.85% was down $6.50, or 0.5%, at $1,409.00 an ounce. It’s roughly $9 off the recent high-water mark of $1,418.70 hit Tuesday, the most robust settlement price for a most-active contract since Aug. 28, 2013, according to FactSet data.

“Gold continues to soften after its euphoric surge see many investors grow cautiously optimistic that positive developments will come out of… the Trump and [China’s] Xi meeting at the sidelines of the G-20 meeting in Osaka. The key to the deal may be if Trump lifts part of the ban on Huawei in exchange for seeing Xi deliver changes to Chinese law to help enforce other parts of the trade deal,” said Edward Moya, senior market analyst with Oanda.

Trump and Xi will use the G-20 meeting this weekend to “press pause” on their continuing trade war, analysts have said. Early Thursday, reports said China had set the terms for the negotiations. The Wall Street Journal reported that Xi will present President Donald Trump terms, focused in part on easier treatment of the controversial Huawei Technologies Co.

The demands raise some doubts that the two sides can achieve a detente and comes after a report from the South China Morning Post that a tentative U.S.-China truce had been achieved.

Stocks were reflecting some nervousness ahead of the meetings, though were also tugged lower by specific movers, such as Boeing Co. Gold and stocks broke with their typically inverse relationship so far Thursday. Read Market Snapshot. Gold also fell despite modest weakness for the leading dollar index DXY, +0.04% .

“The yellow metal could see further weakness if the two nations come closer to outlining this weekend, but should see long-term investors buy the dip on expectations of global easing efforts from central banks across the world,” Moya added.

Expectations for lower interest rates among global central banks and geopolitical concerns centered on trade spats and tensions with Iran had been making gold a preferred investment this spring, especially as competing low-risk U.S. Treasury bond yields dropped. The yield on the 10-year note TMUBMUSD10Y, -0.93% fell below 2% in recent sessions.

MarketWatch

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya