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Gold Sideways as US-China Trade Dispute Deescalates, Dollar Surges

August 26, 2019 at 18:19 by Andrew Moran

Gold futures are trading relatively flat to kick off the trading week as metal investors remain cautious about the latest uncertainty surrounding developments in the US-China trade war. Gold prices appeared to have taken a breather from its recent meteoric rise, which comes as the world’s two largest economies renew trade negotiations following last week’s escalation. But traders have seen this show before.

December gold futures dipped $0.30, or 0.02%, to $1,537.30 per ounce at 17:49 GMT on Monday on the Comex division of the New York Mercantile Exchange. The yellow metal enjoyed a modest 0.8% gain last week, trading at its best level in six years. Year-to-date, gold is up 20%.

Silver, the sister commodity to gold, is rallying to start another week of trading. September silver futures advanced $0.24, or 1.39%, to $17.655 per ounce. The white metal recorded a 2% weekly increase, lifting its 2019 gains to more than 13%.

Over the weekend, President Donald Trump told reporters that Chinese officials contacted his team of trade representatives about returning to the negotiating table. The news sparked a triple-digit rally in domestic equities, but some of the rally was pared because Beijing had disputed Trump’s comments about China communicating with American negotiators overnight.

Last week, 5%, 10%, and 25% tariffs on $75 billion in US goods that are scheduled to go into effect on September 1 and December 15. Once Beijing made the announcement, the president took to Twitter to ask who his bigger enemy is: President Xi Jinping or Federal Reserve Chair Jerome Powell.

While any US-China trade agreement is in doubt, Washington was able to strike a trade deal with Japan in principle. It was reported that American and Japanese trade representatives were going to establish an early harvest, but apparently the two sides were able to reach a full trade deal that will be signed next month during the United Nations General Assembly.

There has been a lot of speculation about this sudden trade agreement. Did Japan and the US try to send a message to China? Will this contain a security arrangement regarding North Korea? Are President Trump and Prime Minister Shinzo Abe desperate as one enters an election year and the other faces a recession?

On the data front, July durable goods orders rose 2.1%, up from 1.8% in June, according to the US Census Bureau. This beats the market forecast of 0.8%.

The US dollar rallied 0.4% to 98.03, from an opening of 97.59. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

In other metal markets, October copper futures added $0.075, or 0.3%, to $2.5375 per pound. October platinum futures tacked on $2.10, or 0.25%, to $857.40 an ounce. October palladium futures surged $14.60, or 1.00%, to $1,468.90 per ounce.

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