A combination of U.S. equity strength and optimism about the current negotiations between the United States and China have resulted in selling pressure in gold. Gold futures are currently trading at $1455 per ounce, a net decline of $8.60 on the day. Gold traded to a low of $1453.90, and a high of $1462. Volume was lighter than usual as traders get ready for Thanksgiving.
The upbeat tone was a net result of the document released on Sunday by the Chinese government which called for more protection of intellectual property rights.
MarketWatch reported that, “The development comes as investors have been scaling back hopes for a phase-one agreement between Beijing and Washington before the end of the year. Such a deal was expected to set the stage for dealing with a chief U.S. complaint, that China steals intellectual property.”
This morning CNBC reported that, “On Saturday, U.S. national security adviser Robert O’Brien said an initial trade agreement with China is still possible by the end of the year, but warned Washington would not turn a blind eye to what happens in Hong Kong.”
However, the same article made note of the fact the “phase one” was passed over six weeks ago, and still there is no agreement that both sides are willing to sign. Traders will anxiously await December 15th to see if the $156 billion in tariffs begin. These tariffs consist mostly of imports of technology, and the question remains as to whether or not these tariffs will be delayed.
Yesterday Reuters reported that, “No 'phase two' U.S.-China deal on the horizon, officials say.” The article suggested that the probability of the United States and China reaching a “phase two” agreement is less likely given that the two countries cannot agree on the first phase. Reuters cited officials from both the United States and Beijing as well as trade experts.
In October when president Trump and Chinese vice premier Liu announced that they had completed, and interim agreement called “phase one” during a press conference the tone was that this first interim agreement could be signed as quickly as November. However, as time passed it was clear that the two sides were still unable to come to a interim agreement that both countries would sign.
On Wednesday of last week Reuters reported that the “signing of a phase one deal could slide into next year as the two countries tussle over Beijing’s demand for more extensive tariff rollbacks.”
Although it can be said that there was mixed messages regarding how close the United States and China are to resolving the trade war and signing a “phase one” agreement, the same cannot be said for US stocks, the message is clear. With the Dow Jones Industrial Average closing at a new all-time record high investors are favoring the risk-on over the safe haven asset class.
Wishing you as always, good trading,