Can The Leaders of the Two Superpowers Find Common Ground?

November 30, 2018 - 6:08pm

 by Gary Wagner

Investors and market participants will be focused intently on tomorrow’s face to face meeting between U.S President Donald Trump and Chinese President Xi Jinping at the G20 summit taking place in Buenos Aires, Argentina.

The summit which began today has already yielded success in the form of the signing of a new trade agreement between the U.S, Mexico, and Canada (formerly known as NAFTA).

As of 6 PM Eastern Standard Time, gold futures (December Comex contract) is trading down approximately $2.60 at $1,227.80. It is still trading above its current support level as the week ends slightly higher for gold pricing.

Spot gold fared much better today by losing only $1.80. On closer inspection, we can see that today’s decline was over 100% based upon dollar strength. According to the Kitco Gold Index, a strengthening U.S. dollar accounted for a decline of $5.30. However, once you factor in normal trading, which actually bid up gold pricing by $3.50, you have the net result of gold losing a $1.80 on the day.

All Eyes Focus Upon the G20

Currently, the leaders of China and the United States hold all the cards. Trump and Xi will meet face-to-face to work towards a favorable resolution and to end the trade war which has been so detrimental to the global economy.

Although the rhetoric on both sides have been harsh as both leaders position themselves to gain the most favorable advantage during the discussions, Trump’s chances for a deal are looking favorable according to high-level officials and analysts.

According to the Wall Street Journal, “the two sides have been engaged in talks for weeks and are looking to set up a new “architecture” beyond this weekend’s G-20 summit for addressing a long list of American issues with Chinese trade and economic policy.

At the same time, the Chinese are scrambling to prop up their economy. The Chinese PMI was at a 50.02, the lowest level since November 2016 according to Bloomberg. “U.S. growth was faster in 2018 than 2017, while China’s growth was slower, so in that sense, the U.S. is in a better position,” said Derek Scissors, an economist with the American Enterprise Institute.

If the news out of Argentina is positive, then we could see the dollar come under dramatic pressure and give back much of the value it gained as the trade dispute morphed into a trade war. This, of course, would be extremely bullish for gold prices.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

P.S.
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Gold Forecast: Proper Action

Wednesday, Novemeber 28 we went long December and Febuary Gold.

Maintain Long December gold @ 1218.80  and stop @ 1204.13
Maintain Long February 2019 (GC G19) and stop @ 1210.13
Gold Market Forecast
Wednesday’s strong upside move which occurred immediately following a statement from the federal reserve Chairman Jerome Powell in which he had a much more dovish demeanor than last month, the fact that we are seeing the market consolidate over the last two tradig days does not surprise me.
 
At this point it will all be about the G 20 meeting which began today in Argentina and include a face-to-face meeting between the heads of the United States and China. Depending on the outcome of those face-to-face talks will truly determine whether or not we see gold spike higher or lower at the beginning of next week. My sense is that Trumps rhetoric prior to the face-to-face meeting is just that, an attempt to set a tone. But I also believe that he will want to paint a rosy picture if there is any gained ground and that would put dynamic pressure on the dollar.
Sentiment Indicator:
Gold -> Bullish
Silver -> Neutral
S&P 500 -> Bullish
Bitcoin -> Neutral