Trade War Uncertainty Results in Dollar Weakness and Moderate Gains in Gold

The entire precious metal complex experienced a moderate gain today. Gold as of 3:30 PM EST is currently trading at $1471.50, which is a net gain of three dollars on the day. The moderate gains in gold pricing can be directly attributed to two primary factors. First is dollar weakness, the dollar index currently down .23%, and fixed at 97.645. Second is a lack of clarity in terms of the current negotiations between China and the United States. Currently both superpowers have been in intensive negotiations to come to a partial and interim agreement called “phase one.”

However, there is a real lack of clarity in terms of any real progress, and when negotiations will yield an agreement that both countries will sign. On Friday of last week news that both sides were coming closer to the final draft of the phase one agreement put pressure on gold pricing which had hit a low of $1446 on Tuesday of last week and then recovered trading higher on Wednesday and Thursday. On Thursday of last week gold futures closed at $1473 per ounce. These gains were short-lived when on Friday gold prices declined closing at $1468.

Today U.S. equities were slightly higher, but quickly gave up those gains as news showed a much more pessimistic outlook as to “if” and “when” negotiations would yield an agreement that both countries would sign. According to Reuters, this pessimism came after “Chinese state media said on Saturday that the two sides had held “constructive” trade talks, days after White House economic adviser Larry Kudlow said they were close to a deal.” According to an article published in CNBC today, the “mood in Beijing about trade deal is pessimistic, government source says.”

Penned by Yun Li the article mentions that the Chinese officials were troubled by Trump’s comments that there was no agreement on phasing out tariffs. This information came from a Chinese government source and was told to CNBC’s Eunice Yoon. One thing is for certain, and that is that the spin being reported by both sides of the trade dispute can completely change from one day to the next. The lack of clarity and real certainty as to how close both sides are to reaching an agreement seems to be the one and only constant in the trade war negotiations. After 18 months of negotiations any progress has been temporary and short-lived. While it is obvious that neither country can come to a common ground with any long-term agreement, it seems at least for now that the two superpowers cannot even reach an interim agreement.

Wishing you as always, good trading,