Gold under pressure as investors await U.S.-China trade talks

Gold skittered lower Monday, on pace to notch back-to-back declines, as investors watched developments in Sino-American trade talks.

U.S. and Chinese officials, including Vice Premier Liu He, are expected to resume trade discussions on Oct. 10-11. However, reports over the weekend indicate that Beijing delegates may be aiming to offer a narrower trade resolution than the Trump administration is hoping.

“There is no consensus on whether this latest round of discussions will make any progress toward a trade agreement,” said Jim Wyckoff, senior analyst at Kitco.com.

Also, “risk aversion is not keen in the marketplace to start the trading week,” he said in a daily note. “There are no geopolitical hot spots on the front burner at present, but some are lingering close, including civil unrest in Hong Kong, turbulence in the Middle East, Brexit and the U.S.-China trade war.”

Against that backdrop, December gold GCZ19, -1.10% on Comex fell $3.90, or 0.3%, to $1,509 an ounce. Prices for the most-active contract edged lower on Friday, but registered a weekly rise of 0.4%, according to FactSet data.

December silver SIZ19, -0.79% shed half a cent, or 0.03%, to $17.63 an ounce, after booking a nearly 0.2% decline for the week.

U.S. benchmark stock indexes edged lower Monday after a powerful rally on Friday, at least partly prompted by the view that the Labor Department’s employment report isn’t weak enough to suggest that an economic recession is in the offing and may even support another rate cut by the Fed.

Gold’s performance has been mixed. It has settled higher in four of the past five sessions but the metal ended September with successive losses, including a 2.2% drop that took it sharply below the psychologically important $1,500 level.

Against that backdrop, some strategists believe that moves in the precious metal will be driven by news on tariffs and policy updates from global central bankers, which have mostly adopted a regime of easy-money stimulus measures.

“Gold’s bullish trend will likely be supported on fresh stimulus bets from global central banks and optimism that we will not see a broader trade deal this week, just a de-escalation in tariff threats and possibly an extended trade truce,” wrote Edward Moya, senior market analyst at brokerage Oanda, in a daily research note.

“Trade jitters are likely to remain for the foreseeable future and that should help keep gold rising higher,” he wrote.

On Friday, gold and silver retreated after the U.S. unemployment rate dropped to 3.5%, the lowest rate since December 1969, even as the headline reading, 136,000 jobs created in nonfarm payrolls in September fell below economists’ expectations.

The report was seen giving the rate-setting Federal Open Market Committee cover to proceed with a quarter percentage point interest-rate cut at the end of October, which would ultimately be bullish for gold.

MarketWatch

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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