After falling sharply due to US President Donald Trump announcing that he would meet China’s Vice Premier Liu He on Friday, gold prices increased today despite trade optimism however gold trades in a volatile range as investors are reacting to the news. more than fundamentals. Wells Fargo said in its latest report that there would be significant volatility in the markets next year and underlined that safe havens like gold performed better than equities 12 months before a recession until the second half of a recession while stating that investors should balance their portfolio with safe havens like gold due to upcoming volatility. In the meantime, China announced today that it would remove limitations for foreign financial ownership and overseas entities would be able to apply for full ownership of onshore companies as of 2020.
Gold prices recovered on Friday since there was still no concrete progress in trade talks after declining sharply yesterday due to optimism that US President Donald Trump would meet China’s Vice Premier Liu He on Friday however volatility increased in the precious metal prices amid ongoing trade talks.
As of 15:00 GMT+3, spot gold was trading at $1,484.05 an ounce after reaching $1,503 earlier in the session, while dollar index was down to 98.30. US 10-year Treasury yield inched up to 1.713.
GoldSilver Central managing director Brian Lan said on Reuters that there was positive news on trade talks but still no concrete progress and thus, the markets were still sceptical. SMC Comtrade assistant vice president of commodity research Vandana Bharti said price movements were due to sentiment rather than core fundamentals and there could be expectation for wild volatility.
Wells Fargo said in its latest report that the US was in the longest expansion since mid-19th century and that would mean a recession could be around the corner while stating they did not expect a sudden end of expansion but the economy was slowing. Bank’s head of global market strategy Paul Christopher said there would be a recession eventually and it was important to diversify portfolios with safe havens like gold while stating that historically from 1926 until today, safe havens like gold and US Treasury bonds outperformed equities from 12 months before a recession to the second half of a recession and provided positive yield even equities saw significant losses. Christopher said investors could take profits from hard charging equities markets and balance their portfolios with safe havens as a hedge against upcoming volatility in the markets next year while adding that investors would rush for gold during volatile markets however underlined the importance of timing.
In the meantime, China announced that it would remove limitations for financial ownership. China Securities Regulatory Commission said on Friday that overseas entities could apply for full ownership of futures companies as of January 1, 2020 while the date for fund management and securities firms would be April 1 and December 1 respectively. China has been working on attracting foreign investors and full foreign ownership is considered a good way to encourage foreign investors to invest in bonds and equities. Besides, it is expected that China would soon experience persistent current account deficit and would need to finance it with foreign funds. However, things will be even more complicated if US President Trump takes measures to limit American investment into Chinese assets, as claimed recently.