Gold prices extend gains since Friday after a rejection from one-month highs around $1,486 during the previous day. The precious metal looks steady despite market optimism over the US-China trade deal. By the way, the reaction in the precious metal shows that investors were not impressed by agreement and they expected something more from the so-called phase one deal.
Within the deal, US reduces some US tariffs on Chinese goods in exchange for larger Chinese purchases of US energy and agricultural products by $200 billion over the next two years. Also, the two countries managed to prevent escalation in their trade conflict. Judging by the behavior of gold market investors, global markets refrain from euphoria as they realize that Washington and Beijing are still far from a comprehensive resolving the dispute that continues to hurt the global economy.
As such, the yellow metal recovered to $1,475 on Friday and extended gains to the $1,478.50 area at the start of a new trading week. In the daily charts, the bullion remains within a familiar trading range entered in early-November, and the upside slope in the 100-DMA points to the prevailing bullish outlook in the short term. The positive scenario for gold is supported by a broad-based dollar weakness against high-yielding currencies amid the persistent risk-on sentiment.
Moreover, the precious metal could gain further once the current market optimism over a trade deal and Tory victory in the UK election abates. By the way, the upside momentum could have been more pronounced today but for positive economic updates out of China, where industrial production and retail sales data came in higher than expected and thus eased concerns over the health of the world’s second largest economy.
Technically, gold prices need to make a clear break above the $1,480 area in order to target the key 100-DMA around $1,490. For now, the upside momentum remains limited. On the downside, the yellow metal should hold above the $1,458 support area in order to stay within the comfort zone.
