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Gold Seesaws As Markets Seek Clarity on US-China, Brexit

October 21, 2019 at 15:43 by Andrew Moran

Gold futures are edging lower to kick off the trading week, but they have been seesawing from positive to negative territory throughout the morning session. The yellow metal, like the equities market, is unable to find a concrete direction on Monday as investors seek clarity on US-China trade deliberations and Brexit. But gold prices might benefit from a weaker greenback.

December gold futures fell $5.30, or 0.35%, to $1,488.80 an ounce at 15:34 GMT on Monday on the Comex division of the New York Mercantile Exchange. Last week, gold recorded a 0.5% loss, adding to its October woes.

Silver, the sister commodity to gold, rose $0.025, or 0.13%, to $17.605 per ounce. The white metal also suffered a 0.4% loss last week, contributing to its monthly decline of 6%.

Last week was interesting for US and China trade relations because the recent developments caused traders to feel anxious over the first phase of a comprehensive agreement between the world’s two largest economies. What was touted as a sure thing immediately diminished into uncertainty as Beijing requested another round of talks and Treasury Secretary Steven Mnuchin confirmed that the December tariffs would go into effect if they cannot ratify the first part of the deal.

Meanwhile, British Prime Minister Boris Johnson submitted an unsigned letter to the European Union over the weekend that ostensibly requested a delay to the nation’s exit from the trade bloc. Following a defeat in Parliament that would have ratified Britain’s divorce from the EU, the prime minister is once again sent his Brexit proposal to the House of Commons for another vote, which is expected to fail.

The chaos unfolding in geopolitical and global economic settings might provide the Federal Reserve with additional evidence to pull the trigger on a third decrease to interest rates this year. Next week, the Federal Open Market Committee (FOMC) will hold its second-last meeting for 2019, and the market widely anticipates another rate cut, lowering the target range to 1.50% and 1.75%.

Overall, analysts warn that if the Fed is less aggressive than initially thought then it would apply pressure to gold. But while a cautious Fed might be bearish for precious metals, a weaker dollar could lift gold permanently above $1,500 again to close out the year.

The US dollar is up a tepid 0.07% to 97.35 on Monday, but the buck has fallen more than 1% in the last week. The latest movements pared the currency’s year-to-date gain to just 1.2%. A weaker dollar is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In other metal markets, November copper futures were flat at $2.6395 per pound. November platinum futures tumbled $5.80, or 0.65%, to $890.10 per ounce. November palladium futures added $5.50, or 0.32%, to $1,723.10 an ounce.

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