Gold prices have settled around $1,476 after three days of gains in a row. The precious metal is range bound amid the lingering trade uncertainty, with bullish bias prevailing amid a lack of progress in US-China negotiations. In this context, the upside risks for gold are still there as Trump’s decision on tariffs due to take effect on Sunday is still under question. This in turn makes investors nervous and keeps demand for safe haven assets fairly robust.
Yesterday, the metal rallied decently on the back of a more dovish than expected tone from the Federal Reserve, as the US monetary authorities hinted that investors shouldn’t bet on rate hikes in 2020, citing the need to see a sustainably higher inflation. As a reminder, the report revealed yesterday pointed to growth in CPI above expectations. However, the data did little to support the greenback which in turn played into hands of gold bulls.
Now, the precious metal is at crossroads as market focus is on the trade developments. According to the latest reports, China commerce ministry said they are in close communication on trade with the United States. At the same time, the officials refrained from comments on possible retaliatory measures in case Trump imposes more tariffs on Chinese goods on Sunday. Later today, the US President is expected to meet top trade advisers to discuss the verdict on higher tariffs. Fresh news from this front could push the yellow metal out of the short-term consolidation channel and set further direction for prices.
The risk for gold is a possible Trump’s
decision to postpone the tariffs, as this step will bring a relief to
stock markets and high-yielding asset in general. On the other hand,
such scenario suggests lower chances for striking a partial trade deal
until the end of this year. This in turn means that the potential
selling pressure in the precious metal could be limited.
Technically, the bullion needs to hold above $1,458 in order not to lose the current upside bias. Otherwise, the bears will retarget the $1,450 support zone. On the upside, the immediate target comes around $1,480. Once below, the metal could potentially challenge the 100-DMA marginally below $1,490.