After closing last week with a weekly loss due to progress made in trade talks between the US and China, gold prices increased on Monday as uncertainty remained regarding the details of agreement and how trade relations would evolve from that point. According to “first phase” of a possible deal agreed on, the US suspended tariff increase previously planned to take effect this week and in return, China committed to buy more American agricultural products. However, lack of details increased uncertainty and it was stated that it would take five weeks to get a pact written. Alongside with this, gold is expected to rise above $1,500 an ounce in the coming weeks due to trade uncertainty and geopolitical tensions with indicators pointing out upside movement. On economic data side, data released in China today showed exports and imports continued to contract in September.
Even though progress made in US-China trade talks weighed on yellow metal, gold prices remained supported by trade uncertainty and geopolitical tensions alongside with global economic slowdown.
As of 15:33 GMT+3, spot gold was trading at $1,492.99 an ounce while dollar index was up to 98.49.
RMC Wealth Management Managing Director George Gero said on Kitco that profit taking and stop-loss trading on Friday would end and gold prices would position better this week while adding that gold would again rise above $1,500 an ounce in a few weeks.
On technical side, Kitco analyst Jim Wyckoff said investors would buy the dips and charts were still bullish on gold while adding that geopolitical tensions could support gold prices.
According to first phase of possible trade deal agreed on following the trade talks last week, the US suspended previously planned tariff increase on Chinese goods worth $250 billion from 25% to 30%, which would take effect this week, while China committed to buy US agricultural products worth about $50 billion. However, part of a possible deal that is called “first phase” is not yet a written deal and lack of details released regarding the deal caused uncertainty to remain around trade relations. Besides, there is a risk of deal breaking down when the time comes for major conflicting issues like intellectual property rights and technology transfer to be opened for discussion in the upcoming months. Yet, sides stated that they would continue to put effort for further progress and US President Donald Trump said it could take up to five weeks to get a pact written.
On economic data side, data released today showed contraction in Chinese exports and imports continued in September. According to the data, China’s exports fell 3.2% in September and contracted the sharpest since February while 8.5% fall in imports was below expectations. This was due to weakening global demand alongside with US-China trade dispute and it was also stated that Chinese exporters picked up the pace of shipping the ordered products to the US to avoid recent tariff increase which took effect on September 1. Chinese economy is expected to remain under pressure as tariffs will remain.