Gold slides over 1% to one-month low on trade deal hopes

(Reuters) – Gold slid more than 1% on Thursday to its lowest level in over a month as U.S. Treasury yields jumped and global equities markets cheered China and United States’ agreement to cancel some tariffs in phases.

Spot gold was down 1.4% at $1,469.03 per ounce as of 11:03 a.m. EST (1603 GMT), having slipped to $1,467.71 its lowest since Oct. 1 earlier. U.S. gold futures fell 1.5% to $1,470.70.

“Postponing the China tariff deal was adding to uncertainties, but it seems that there is some agreement to remove some tariffs before year end… China has a weakening economy and needs to make a deal,” said George Gero, managing director at RBC Wealth Management.

China and the United States have agreed to cancel, in phases, the tariffs imposed during their protracted trade war, the Chinese commerce ministry said, without specifying a timetable.

The news lifted Europe’s share markets to a more than four-year peak and benchmark U.S. Treasury yields rose to their highest since early August, hurting bullion’s safe-haven appeal.

Adding further pressure on the yellow metal was a firm dollar, which was at a three-week high against key rivals.

Gold was also trading below its 100-day moving average of about $1,476 an ounce for the first time since May.

“Gold is in danger of breaking below its key recent range as trade optimism continues to drive a global risk-on rally move that is driving both global bond yields and the major indexes sharply higher,” said Edward Moya, a senior market analyst at OANDA.

“Gold’s longer-term bullish outlook should still be reasserting itself, but that might not happen until we see a major selloff that targets the $1,450 an ounce level.”

The 16-month tit-for-tat tariff war between the world’s two biggest economies is one of the key reasons that gold, a safe-haven asset during times of economic and political uncertainty, has jumped over 14% so far this year.

Bullion had also gained this year on the back of easing monetary policy by global central banks along with the Federal Reserve, which had slashed its benchmark interest rate for the third time this year.

 

Reuters

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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