A rally in U.S. equities and forward movement in U.S.-China trade talks pressure gold

It seems as though traders and market participants are favoring the risk on asset class, even during a global pandemic which has truly been at the root of economic contractions in countries worldwide. Overseas global stock markets were higher today, and the Standard & Poor’s 500 is currently trading at an all-time record high. Yesterday’s close in the Standard & Poor’s matched very closely to the highs witnessed during mid-February, when the S&P 500 traded just shy of 3400. Currently we have that index fixed at 3,438.11 which puts it in uncharted territory.

Concurrently we have both gold and silver trading lower on the day. This in light of dollar weakness. As of 3 PM EDT the dollar index is currently down by approximately ¼%, and fixed at 93.04. Gold futures basis the most active December contract is currently fixed at $1930.90, which is a net decline of $8.30 on the day. Silver is down by approximately 6/10 of a percent, or $0.15, taking September futures to $26.46.

News outlets today reported some optimistic news about the current trade talks between the United States and China. As reported by Yahoo money, “U.S. Trade Representative Robert Lighthizer said representatives of Washington and Beijing pledged to ensure the historic trade agreement's success in a call reviewing progress during its first six months that he held Monday with Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. The disclosure buoyed markets worried by increasing tension between the two countries, with President Trump blaming Beijing for failing to contain the COVID-19 pandemic and saying he had no desire to negotiate with the Chinese on trade at present.”

According to Reuters, “Top U.S. and Chinese trade officials reaffirmed their commitment to a Phase-1 trade deal and discussed how to increase lagging Chinese purchases of American goods, lending support to financial markets on Tuesday.”

However, market participants will await the onset of this year’s economic symposium which is being held virtually and sponsored by the Federal Reserve’s Kansas City Central-Bank. The 44^th annual Economic Policy Symposium will be held from August 27 to August 28. This year’s topic “Navigating the Decade Ahead: implications for Monetary Policy” underscores the consensus that the global pandemic of 2020 will continue to effect monetary policy over the next decade.

It is also widely expected that the Federal Reserve’s Chairman Jerome Powell will address the recalibration of their current inflation target of 2% to a number closer to the actual figures over the last few years. This is truly the most important economic event this month.

Wishing as always, good trading,