Possibly One of the Most Important G 20 Meetings in History

November 27, 2018 - 5:00pm

 by Gary Wagner

This weekend the leaders of the G20 will meet in Argentina. The importance of this conference lies within the side meetings between the leaders of the United States and China. The question on traders’ minds is whether or not Xi and Trump can move closer to some sort of resolution to the trade dispute which has now morphed into an out and out trade war.

President Trump is on record stating that if the countries do not come to an agreement, then he will impose tariffs on the remaining $260 billion worth of Chinese imports. In an interview with the Wall Street Journal today, the president said that he would be “highly unlikely” to delay an increase in the tariffs of Chinese goods to 25%, which is due to take place starting on January 1.

Most economists agree that such a move would have adverse consequences on global financial markets as a whole. However, most economists also see the United States as being in a much stronger economic cycle than China and therefore feel it would be less affected than the Chinese economy.

Jim Wyckoff of Kitco News said, “This week’s meeting between U.S. President Trump and China’s President Jinping Xi in Argentina is not expected to produce a very positive outcome on the trade matter. Trump made more hardline comments on the matter Monday. There is general agreement that the trade war is hurting China’s economy much more than the U.S. economy. The U.S.-China trade war has also been supporting the U.S. dollar’s appreciation.”

As far as gold is concerned, the most important component of price change has been directly tied to U.S. dollar strength or weakness. It has been a strengthening dollar that has put tremendous pressure on gold pricing. That pressure continues today with the dollar index gaining 3/10 of a percent which has caused it to be presently fixed at 97.26.

Spot gold is currently fixed at $1,212.70 with a net decline of $8.90 today. It is both dollar strength as well as selling pressure that have contributed to today’s decline. Roughly $4.15 is due to a strengthening U.S. dollar, with the remaining $4.75 directly attributable to traders aggressively selling gold today, according to the KGX (Kitco Gold Index).

If, in fact, it is highly unlikely that the talks this weekend between the United States and China will result in a resolution of the current trade war, and if President Trump makes good on his remarks to impose additional tariffs on $260 billion worth of Chinese imports, as well as ratcheting up the tariffs which are currently at 10% to 25%, we could see a stronger U.S. dollar, global equities under pressure, and lower gold prices.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

We are currently flat with no active trades in gold or silver. We are however looking to position ourselves from the long side. See market forecast for specifics.

Gold Market Forecast

With today’s dynamic selloff in both gold and silver we are still on hold in terms of positioning ourselves from the long side on our next active trade. Simply put I want to let the dust settle to see if gold pricing will move a little lower with $1200 per ounce being a major level of support. The other scenario would be if gold pricing find support at today’s lows and begins to move back above $1218 which was the former level of support that was broken today.