Gold futures slipped slightly lower Wednesday, pulling back from a one month high, as investors weighed a recent report that trade talks between Beijing and Washington are progressing against President Donald Trump’s comments that he could delay a partial resolution until after the 2020 presidential elections.
Bloomberg News reported early Wednesday that a Sino-American trade pact was close to coming to fruition and that details on a partial roll back of import duties was being discussed, despite recent rhetoric that suggested that the tensions between the parties was becoming inflamed.
Gold for February delivery GCG20, -0.05% on Comex lost $2.70, or 0.2%, at $1,481.70 an ounce, after jumping 1% to the highest settlement for a most-active contract since Nov. 6, according to FactSet data. March silver SIH20, -0.25%, meanwhile, shed 3 cents, or 0.2%, to trade at $17.215 an ounce, following a 1.7% surge in the previous session.
The fresh reports come after Trump on Tuesday said it might be preferable to hold off on completing a long-awaited U.S.-China trade deal until after the November 2020 presidential race.
The developments around trade come ahead of a Dec. 15 deadline for the imposition of fresh import tariffs on China.
Gold has benefited from lower yields in government debt, like the 10-year Treasury note TMUBMUSD10Y, +1.50% at around 1.75%, and softness in the U.S. dollar, as measured by the ICE U.S. Dollar Index DXY, -0.24%, because lower rates can reduce the opportunity cost of owning gold versus the perceived safety of government paper and a weaker buck can make dollar-pegged bullion more attractive to buyers using other currencies.
Still, the uncertainty surrounding a trade deal, even in the face of Wednesday’s optimism, has tempered the enthusiasm for gold bears.
“Appetite towards the precious metal is likely to receive a boost if Washington moves ahead with the tariff hikes on December 15. Brexit and global growth concerns are also seen as other risks which may push the precious metal higher in December,” wrote the research team at FXTM in a daily research note.
“Focusing on the technical picture, Gold is bullish on the 4-hour timeframe with prices trading around $1480 as of writing. Upside momentum could push prices towards the $1492 level in the short to medium term.,” FXTM analysts wrote.
“Gold still offers up the cheapest hedge against a significant drop in equity markets, and it makes sense given the Fed’s responsive nature to toggle the rate cut lever,” wrote Stephen Innes, chief Asia market strategist at AxiTrader, in a Wednesday report.