Gold bulls tiring on the 1500 handle as trade talk sentiment flips positive

  • Trade talks going well and risk on driving gold lower.
  • Bloomberg News had reported that the White House could put in place a currency pact and suspend tariff increases.

The price of Gold has been capped ahead of the key $1,520 target on a reverse in sentiment surrounding trade talks. Gold has dropped to a low of $1,491.77 and was down over 1% at one stage following optimistic trade talk headlines. Gold is currently trading at $1497.85, -0.91% at the time of writing. 

Gold futures also traded lower following news how trade talks have started off well, and in earnest, while Trump is also due to meet with  Chinese Vice Premier Lui He on Friday. “Big day of negotiations with China. They want to make a deal, but do I? I will meet with the Vice Premier tomorrow at The White House,” said Trump.

Prior to that, Bloomberg News had reported that the White House could put in place a currency pact and suspend tariff increases that are set to take effect Oct. 15. This followed mixed headlines in early Asia yesterday, leaving markets guessing as to whether high levels trade talks would take place or not.

Gold spiked on the possibility of the Chinese delegation cutting short negotiations, and rallied towards he said $1,520 target. However, prices were sent back and December gold on Comex lost some $14, or 0.9%, to $1,498.80 an ounce, after rising 0.6% on Wednesday.  December Silver was also on the back foot, losing 29 cents, or 1.7%, to reach $17.515 an ounce, following a gain of 0.6% the prior day.

Case for holding precious metals as a tail risk hedge for equities is still growing

"The case for holding precious metals as a tail risk hedge for equities is still growing, with ETF purchases soaring some 20% year-on-year and showing no sign of slowing down as of yet," analysts at TD Securities argued.  "At the same time, with a high proportion of real rates in negative territory, purchasing gold as an alternative to bonds is particularly attractive given the paradigm shift narrative."

Gold levels

Technically, bears can target a break to below a 50% mean reversion of the late June swing lows to recent highs around 1460/70. However, on the upside, bulls should the price remain in the vicinity of the 1500 level, then eyes can stay set on the 1520 level ahead of a 1535 resistance target. 

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