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· Gold prices were tepid on Friday, after dropping up to 2% in the previous session, as hopes of headway in the U.S.-China trade deal boosted risk-on sentiment, denting the bullion’s appeal.
· World stocks rallied and the dollar index gained after officials on Thursday said that China and the United States have agreed to roll back tariffs on each others’ goods as part of the first phase of a trade deal.
Spot gold was trading at 1,468.51 per ounce, as of 0335 GMT, poised for its biggest weekly drop since May 2017. In the previous session, prices dropped to their lowest in more than a month.
U.S. gold futures were up 0.2% at $1,469.80 per ounce.
· “The market is coming to terms with the move that marked the breakout of the fairly long-standing range and finally gold seems to have made a move lower,” said Ilya Spivak, a senior currency strategist at DailyFx.
However, the ‘phase one’ trade deal faced fierce internal opposition at the White House over concerns whether rolling back tariffs will give away U.S. leverage in the negotiations.
· “The market has a lot of questions about this, and that’s why ... even though there was a selloff, gold did not break below the lows in August,” Spivak said.
“If there isn’t any clarity, we will get a sideways range, if we get a clear ‘no’ — as all of the previous talks just ended in more tariffs, a lot of promises of a deal that came to nothing — gold will go higher. If the deal does look solid and there is a de-escalation, then gold will head lower.”
· Gold prices have risen about 14% so far this year mainly due to the protracted trade war that spurred global economic slowdown fears.
Reflecting sentiment, holdings in the world’s largest gold-backed exchange-traded fund SPDR Gold Trust dipped 0.16% on Thursday.
· “Given the positivity that is reflected in equities and rates markets, the acknowledgement that things could just as easily take a turn for the worse appears to be expressed through gold positions at the moment,” UBS said in a note.
“This raises the risk that further improvements towards a credible and comprehensive trade deal would trigger substantial unwinding in the gold market.”
Elsewhere, silver dropped 0.5% to $17.03 per ounce, and was set to fall about 6% for the week — its steepest since July 2017.
· After rising to the highest level since 2013, gold prices are likely to retreat and stabilize around $1,400 an ounce next year before rallying again to $1,600 an ounce in 2021, according to one Australian bank.
“Investors worldwide have already substantially boosted their exposure to the metal, net-length in CME futures and ETF holdings are oscillating around all-time highs recently – while the price has reported historic highs in almost all major producer and consumer currency-terms," wrote Macquarie's commodities strategists at the end of October.
"If global growth improves or if risk sentiment is lifted by a stabilization of the geopolitical backdrop in the U.K., U.S. and Middle East, this could ultimately impact the price," the report said.
Going forward, Macquarie expects gold prices to stabilize around the $1,400 an ounce level in 2020.
The move is likely to be "underpinned by on-going central bank buying and increased long-term investor allocations both offsetting the retracing of short-term positioning to more sustainable levels."
After a steady correction, gold will strengthen once again, but this time for longer, peaking above $1,600 an ounce in 2021, added Macquarie.
· December gold futures prices were near the session low at midday. The bulls have lost their overall near-term technical advantage amid as prices have been trending lower for two months. Gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,500.00. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at $1,425.00. First resistance is seen at $1,475.00 and then at $1,480.00. First support is seen at today’s low of $1,462.20 and then at $1,450.00. Wyckoff's Market Rating: 5.0
· Gold: Range breakdown confirmed as US yields hit three-month highs
Gold is looking south, having witnessed a range breakdown amid the spike in the US treasury yields.
The yellow metal is currently trading at $1,468 per Oz, representing a 1.48% drop on the day. Prices hit a low of $1,460 earlier today. That was the lowest level since Oct. 1.
With the drop to multi-week lows, gold has convincingly dived out of a five-week trading range of $1,520-$1,475.
The breakdown could be associated with the rise in the US Treasury yields. Notably, the 10-year yield has risen from 1.80% to 1.97% –the highest level since Aug. 1 – making the zero-yielding gold looks unattractive.
The rise in yields is also boding well for the Dollar Index, which measures the value of the greenback against major currencies. The index is currently trading at 98.13, representing a 0.20% gain on the day. The American Dollar is gold's biggest nemesis.
Looking forward, the US-China trade optimism and the uptick in the stocks and yields will likely keep gold on the defensive.
A deeper drop toward $1,450 could be seen, unless China's trade data prints well below estimates, forcing investors to boost their exposure to safe-haven assets.
· Platinum fell 0.3% to $906.06 per ounce, poised for a more than 4% drop for the week. Palladium lost 0.2% to $1,797.87, and was headed for its worst week in five.