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Breakdown in trade talks to help gold


22 November 2019

The gold price remains further subdued in today’s trading session after the latest minutes meting from the US Federal Reserve left the market predicting that the Fed have finished with their rate cutting cycle this year. After recently reducing rates by 25 basis points the central bank noted that the latest move should support the economy and that they will take a wait and see approach with regards to further rate movements.

Gold has benefited this year from lower rates in the US which makes the US dollar less attractive as an interest-bearing investment which usually benefits the precious metal

“With regard to monetary policy beyond this meeting, most participants judged that the stance of policy, after a 25 basis point reduction at this meeting, would be well calibrated to support the outlook of moderate growth, a strong labor market, and inflation near the Committee’s symmetric 2 percent objective and likely would remain so as long as incoming information about the economy did not result in a material reassessment of the economic outlook,” the minutes said.

With rates remaining on hold, gold may need another angle for support and that could come in the form of a slip up in trade talks between the US and China with this week US President Donald Trump teeling his cabinet that China needs to make a deal or he introduce the further tariffs which are due to kick in on Dec 15th which some say will take its tolls on the US economy and leave investors once again seeking out gold as a safe haven

“While not a base case for most investors at present, a complete breakdown in the current trade talks should send Gold surging back above $1,500 while potentially paving the way for a global recession” said t analyst Han Tan. As markets start to doubt the progress surrounding the ‘Phase I’ trade deal, gold is gaining ground.  “Even if a limited deal is signed, gold is still likely to end the year with its double-digit annual gain intact. A new potential obstacle on the horizon is the U.S. Senate passing legislation in support of the Hong Kong protests. Such a move threatens to drive a wedge into ongoing U.S.-China negotiations while potentially raising the barrier to a trade deal,” Mr Tan added


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