Gold moves in a sideways chop around the pivot on mixed risk sentiment

Metal prices got a boost mid week with improved optimism over Sino/US trade relations. The news that China might even delay its 'Made in China 2025' strategy by a decade lifted the market's spirits as well. Both Beijing and the Trump administration appear to be on their way to reaching a trade deal this time around which had lifted risk appetite.  

China has also said it will reduce tariffs on imported autos, (underlying support for palladium prices), while President Trump indicated he would intervene in the arrest of Huawei’s chief financial officer Meng Wanzhou if it would help ensure a trade deal with China. China has also made the first big US soybean purchase since the Trump-Xi tariff war truce made.  This has left Gold prices on the backfoot, with the Feb. gold contract settling at $1,247.40/oz, down $2.60, or 0.2% on Thursday. 

The tables turn

However, we have seen the tables turn on news that China had arrested a second Canadian diplomat in apparent retaliation for Meng’s arrest. At the same time, reports on Thursday have been that President Trump’s aids were warning the president that his authority to intervene in the affair is limited which sent stocks lower and gold into a sideways chop.

"Considering that the Fed is casting a long shadow with its meeting next week, we expect that the FX environment will remain benign for now. That being said, risks of triggering significant shifts in CTA flows have eroded in the near-term, suggesting that precious metals could need to a catalyst for the time being. We think that the complex may need more certainty that the Fed will not move towards restrictive policy next year before prices move substantially higher,"

analysts at TD Securities reported. 

Gold levels

The 38.2% fibo of the 2018 decline is tempering bearish advances. However, the price has drifted sideways through the Dec trend line support which opens the case for further losses if bulls cannot get back above 1250 in the coming sessions. 4hr DMI point to further declines also which will target S3 located at 1238. On the flip side, on a breach of the 21-4hr SMA located at 1244, bulls can reset their sights for the 50% Fibo at 1262, just above the 200-D SMA that is found at 1255.