Gold is slipping – Commerzbank

The price of Gold has slipped further in light of the preliminary resolution of the trade dispute between the EU and the US, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen reports.

Risk of EU-US talks failing is now being priced out.

"Additionally, the US Dollar (USD) appreciated significantly yesterday, which likely put additional pressure on the Gold price. Since its high last week at nearly $3,440 per ounce, the precious metal has lost over $100 in value. Indeed, the US government has now succeeded in reaching a preliminary agreement with the three key economic powers, the EU, Japan, and China, to avoid an escalation and thus prevent worse for the economy."

"Even though the US administration, or more precisely President Trump, initiated the tariff conflict, the US economy would probably have suffered the most from the introduction of even higher tariffs. After all, the US is currently imposing tariffs on almost all its trading partners, while the EU, Japan, and China are "only" facing tariffs on one (albeit important) trading partner."

"The price reaction shows that there were fears in the market that the talks between the EU and the US might fail. This risk is now being priced out. At the same time, the uncertainty surrounding tariffs remains high. In particular, their impact on the US economy and inflation is likely to become increasingly apparent in the coming months. Support for the Gold price may come in the form of interest rate cuts by the Fed in this context. Regarding timing, the Federal Reserve meeting on Wednesday could provide new clues. If the central bankers signal an imminent rate cut — despite ongoing inflation risks — the Gold price is likely to benefit."