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US –China trade negotiations exert pressure on gold market

Jan 8 2019, 01:27 AM (CST) | Fortfs.com

Gold was able to complete the day with growth on Monday (+ 0.27%), but already today in Asian trading sellers managed to seize initiative and regain back all lost positions due to the corrective strengthening of the dollar and the increased risk appetite.

Over the last three days, USD dollar index has been trading with a significant decline, supporting gold, which is denominated in US currency. Today we see a backlash in the market, despite the strengthening of negative trends, USD dollar is recovering some ground as part of a local correction that is currently developing in the market. But the growth of the dollar is likely to be limited because yesterday the US Congress did not approve fund allocation for the construction of the wall on the border with Mexico, so the federal agencies in the United States will still remain without funding. Another strong pressure factor on the dollar is the softer rhetoric of the Fed representatives, who ambiguously hint at a slowdown in the rate of increase in the US rate in 2019.

A strong negative factor for gold is the recovery of the world's major stock indices. Yesterday, the US stock market once again completed trading in the green, reducing investor interest in defensive assets such as gold and the Japanese yen. The growth of risk appetite in recent days is associated with renewed trade negotiations between the United States and China, which are taking place these days in Beijing as well as with strongest US labor market data. Investors hope that the intensification of negotiations will contribute to the speedy achievement of agreement on all controversial issues and the conclusion of a trade agreement between the two largest economies in the world.

Today, there are no important statistics in the economic calendar, so investors will focus on geopolitical events and stock market situations. On this background, we can expect moderate pressure on the yellow metal to be maintained, since, expecting positive results of the Beijing meeting, investors continue to buy riskier assets.

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