Gold Investors Eye Tariff Deadline, UK Elections
|On Wednesday, gold rallied sharply after the Federal Reserve held its benchmark rate in a target range of 1.5%-1.75% as expected. The US central bank also signaled that it could continue to hold rates steady through 2020. As expectations for an interest rate increase were snuffed, gold surged and the US dollar index fell to its lowest levels in 4 months.
With the December FOMC meeting in the rear view mirror, gold investors turn their attention to the crucial tariff deadline coming up on Sunday December 15th. US President Donald Trump will reportedly meet with top trade advisors on Thursday to discuss tariffs on $160 billion worth of Chinese imports, including consumer goods such as smartphones and clothing.
Many analysts had expected China and the US to reach a ‘Phase 1’ deal prior to December 15th. However, Trump’s recent comments suggesting that a trade deal with China could wait until after the 2020 election, dampened hopes. If the tariffs are introduced on Sunday, gold prices would likely be boosted by safe-haven demand. Since the trade war began in early 2018, the US and China have imposed tariffs on over $450 billion of each other's exports.
Investors also look to Thursday’s UK election, dubbed as the most important in a generation. The crucial vote could decide the fate of Brexit. Prime Minister Boris Johnson of the Conservative Party has pledged to ‘get Brexit done’, while Labour’s Jeremy Corbyn has committed to hold a second referendum. The pound was boosted earlier in the week as polls showed the Conservative Party making gains against Labour. The picture became less clear after a YouGov MRP poll on Wednesday indicated that the number of seats the Conservative Party are expected to win had fallen, narrowing the Tory lead. A Conservative Party victory would likely underpin sterling, as such a result is viewed as being the most likely to resolve the uncertainty surrounding Brexit.
Looking at the gold daily chart we can see that price rallied to find resistance at the 50 period moving average on Wednesday. Further potential resistance lies overhead at the prior high of 1,517 while trendline support currently sits below at 1,432.
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