Gold Prices Stalled by US–China Trade Truce, but Not for Long

Yesterday, Gold prices plunged below US$1,400 an ounce as markets opened in the aftermath of the G20 Summit in Japan. The most relevant news being US President Donald Trump and Chinese General Secretary Xi Jinping have agreed to resume US–China trade negotiations.

The spot price of gold fell as much as 1.8%, making it the biggest intraday decrease in a year.

Prices had reached a six-year high last week when tensions hit a melting point. Gold miners such as Northern Star Resources Ltd [ASX:NST] suffered temporarily — dropping by 4.03% yesterday before lifting 1.25% to $11.45 today.

The next trigger for gold prices is set to come from data analysing US jobs, due Friday. This may indicate the Federal Reserve’s next move on policy.

Related: Why Trump matters to gold investors?

US jobs set to trigger rising gold prices

It seems that top central banks, including the Federal Reserve, are taking a more dovish tone, driven by thoughts that US interest rates could be sinking lower.

Daniel Hynes, a commodity strategist at ANZ, told Bloomberg Television:

Certainly this morning, we’re seeing some weakness

‘But I do think the outlook for rates in the US in particular has been a real driving force. So we’re quite positive towards gold, we think this abatement in the US dollar strength and potential rate cuts in the near term will certainly continue to boost investment demand.

Details on the G20 summit are still surfacing, but after meeting with Xi, Trump said he would delay imposing additional tariffs on Chinese imports and postpone restrictions against Huawei Technologies, allowing US companies to continue sales to China’s biggest telecommunications equipment maker.

Michael Taylor, managing director of Moody’s Investors Service, said:

Although the agreement will likely partially relieve recent negative sentiment in the financial markets and support near-term growth, it stops short of removing existing tariffs.

However, Moody’s expect China will continue to ease policy in an effort to offset the impact of the existing tariffs and that major central banks will maintain their bias towards the more accommodative policy.’

Positivity still swirls around gold prices

Positivity for gold is riding on the back of global uncertainty.

It is important to remember there’s only a certain amount of gold that can be discovered in the world. So, while holding investments in gold miners can be an asset to your portfolio, there is a lack of appetite for risk among investors.

As a result, junior gold explorers have been struggling to raise capital, and are more focused on sustaining operations rather than discovering new ones, according to Gold Road managing director Duncan Gibbs.

Some bullion analysts believe that when investing in gold, it’s more worthwhile to buy physical gold as opposed to gold stocks — permitted you have a secure place to keep your physical gold.

We recommend conducting your own research before investing, and never investing more than you can afford to lose.


Ryan Clarkson-Ledward,
For Money Morning

PS: In a brand-new Money Morning report titled ‘Three Reasons to Add Gold to Your Portfolio’, Greg reveals three reasons gold could be a valuable addition to your portfolio. Read more about it here for free.

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

Ryan is also the Editor of Australian Small-Cap Investigator, a stock tipping newsletter that hunts down promising small-cap stocks by dissecting the latest events affecting the world.

To find out more about the publications Ryan works on and how you can subscribe, please click on the corresponding link here:

Money Morning Australia