The longer a U.S.-China trade deal is missing in action, the better it seems for gold.
Both bullion and futures of gold rose on Thursday, extending their green line since Tuesday’s post-settlement, as the phase one of the trade agreement sought by presidents Donald Trump and Xi Jinping remained elusive, more than two weeks after the White House triumphantly announced the plan.
Gold futures for December delivery on New York’s COMEX settled up $10.10, or 0.7%, at $1,473.40 per ounce.
Spot gold, which tracks live trades in bullion, rose by $10.38, or 0.7%, to $1,473.32 per ounce by 1:57 PM ET (18:57 GMT).
Since Tuesday’s settlement, gold has risen about $20 an ounce after falling as much as $50 from highs of around $1,520 at the start of November.
“It seems gold is still very much following the tone of trade talks and has also seen support from some increased safe-haven mentality,” said Eric Scoles, precious metals strategist at RJO Futures. “The market seems to have rejected the recent lows and are respecting $1450 as a firm support point.”
Gold has been a safe-haven hedge for the trade war, and the losses in the early part of November losses came as the White House and China initially appeared to be inching toward a resolution of their bitter 16-month trade dispute.
The last the market heard anything positive on the trade negotiations was on Tuesday when Trump said a deal might happen “soon”. Otherwise, it has been negative reports on how both sides were unable to agree on rolling back tariffs or about China refusing to commit to $50 billion of farm purchases Washington is demanding to get the phase one going.
Also weighing on gold lately were suggestions by the Federal Reserve that it might be done cutting interest rates for this year, after three consecutive quarter-point reductions between July and October. Fed Chairman Jay Powell told Congressional committees this week the central bank was unlikely to move on interest rates given the “sustained” economic expansion.
RJO’s Scoles, however, cautioned investors to watch that this week’s gains in gold do not turn into a bull trap for them.
“From a technical perspective, the gains over the last two days may just be a bear flag leading up to continued crumbling of prices,” he said. “Keep an eye on support at $1,450. If prices stay above that level, the bulls may find enough confidence to push prices back up to $1,492; if that support level fails then I’d expect to see $1,425 in the near future.”