Commodity Blog

Gold futures are tumbling to kick off the trading week, driven by investor optimism that the US and China are inching toward finally agreeing to phase one of a comprehensive trade deal. This cautiously upbeat sentiment helped financial markets record fresh highs, which were also triggered by a series of mega mergers. But Wall Street analysts remain bullish on bullion heading into 2020.

December gold futures fell $8.00, or 0.55%, to $1,455.60 per ounce at 16:57 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold prices recorded a weekly loss of 1% last week, but they are still up more than 13% year-to-date.

Silver, the sister commodity to gold, is also shedding its value to start the trading week. December silver futures slid $0.09, or 0.53%, to $16.91 an ounce. The white metal slumped 0.6% last week, adding to its 5% decline month-to-date. So far this year, silver has risen 8.6%.

On Sunday, the Chinese government published a document that requested greater protection of intellectual property rights (IPR). This subject has been the core issue in US-China trade negotiations, and this is the first time that Beijing has publicly called for strengthening IPR protections, noting that it is “the biggest incentive to boost China’s economic competitiveness.” The General Offices of the Communist Party of China Central Committee and the State Council published several guidelines that include speeding up the implementation of “a punitive compensation system for infringements of patents and copyrights.” The document also listed heightened security of trade secrets, source codes, and confidential business information.

Moreover, Robert O’Brien, the US national security adviser, said that a deal could still happen before the end of the year.

The positive development in US-China relations was offset by a Reuters report that cited officials from both countries in expressing doubt that phase two will be easy to establish. According to the sources who spoke on the condition of anonymity, the second phase will be hard to achieve because it will likely include disputes over Beijing’s militarization of the South China Sea, the country’s human rights record, and US intellectual property rights concerns.

Equities were surging on Monday and hitting new highs. Markets were also cheering on the two major mergers: Charles Schwab acquired TD Ameritrade for $26 billion in an all-stock deal, while LVMH bought Tiffany & Co. for $16.2 billion.

Despite the gold-negative near-term trends, Goldman Sachs reiterated its $1,600 price target for the yellow metal. The Wall Street titan cited political uncertainty and modest growth in investment demand as some of the primary drivers of gold’s ascent.

In other gold news, the Polish government repatriated approximately 100 tons of gold from the Bank of England (BoE) to highlight the strength of its near $600 billion economy. In 2018 and 2019, Poland purchased 126 tons, increasing its metal reserves to just under 229 tons. Poland is now the 22^nd largest bullion holder and possesses the biggest metal reserves in the European Union’s east.

In other metal commodities, December copper futures were flat at $2.647 per pound. December palladium futures rose $28.40, or 1.63%, to $1,771.80 an ounce. December platinum futures tacked on $7.50, or 0.84%, to $900.10 per ounce.

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