Spot gold leads futures as both react to increased tension between U.S. and China

Spot gold led the way in terms of price advance when compared to the August 2020 Comex contract, which is the most active futures contract. Spot or Forex pricing is currently fixed at $1738.59 which is an increase of over $9 on the day. Gold futures basis most active August contract is currently fixed at $1750.80, which is a net decline of a $0.90 on the day.

UPDATE: as of 6:40 PM EST golf futures are up +2.40 @ $1752.70

The moves in both spot and futures today was greatly influenced by dollar weakness which accounts for the majority, if not all of today’s price change. According to the KGX (Kitco Gold Index) as of 4:46 PM EST spot gold is currently fixed at $1736.90. A net increase of $8.20 on the day. However, dollar weakness has resulted in spot gold gaining $8.60, while traders have bid the precious yellow metal fractionally lower to the tune of $0.40, resulting in today’s higher pricing in spot gold.

Along with the current pandemic and this weekend’s protests, riots and looting there is a real concern about increase in tensions between China and the United States. According to Bloomberg China has halted some of the U.S. farm imports which not only threaten a trade deal, but in essence break the agreement reached for the phase one trade agreement.

Bloomberg reported that “Chinese government officials told major state run agricultural companies to pause purchases from some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the US over Hong Kong, according to people familiar with the situation.”

Also, this report said that state-owned traders Cofco and Sinograin were ordered to suspend purchases. The report went on adding. “The halt is the latest sign that the hard-won phase-one trade deal between the world’s two biggest economies is in jeopardy. While Chinese Premier Li Keqiang last month reiterated a pledge to implement the agreement that was inked in January, tensions have continued to escalate since then amid a standoff over Beijing’s move to tighten its grip on Hong Kong.”

Last week President Trump announced that the United States would begin the process of stripping some of Hong Kong’s trade privileges, without detailing how many changes would take effect and how many exemptions would apply.

The breakdown of talks between the United States and China, coupled with the current pandemic, and the riots in the United States could certainly have a dynamic effect on the safe haven asset group specifically gold.

Wishing you as always good trading and good health,