Gold: Struggles to justify Monday’s inverted hammer, eyes on trade news, China inflation

• Gold fails to benefit from the recent candlestick formation, market’s risk-off.
• Trade headlines come in mixed, USD pulls back ahead of the key events.
• China’s CPI/PPI data will offer immediate direction.

Gold prices extend Monday’s recovery to $1,461 by the press time of early Asian session on Tuesday. Even so, the Bullion fails to justify the candlestick formation signaling reversal of the previous heavy fall.

The precious metal’s recent upticks could be attributed to the mixed headlines concerning the trade relations of the United States (US) and China, not to forget the tri-party trade deal between the US, Canada and Mexico. While the US diplomats, including President Donald Trump, have been upbeat about the progress made on trade talks in both the instances, responses from the other side have been varied.

The recent headlines from Global Times raise doubt on the phase-one deal between the US and China. Also, the US blocking China funds from World Bank and Beijing cutting down of foreign computer/software use play their parts as well.

All eyes of central banks, the UK election and the US tariffs...

The present week becomes the key for global markets as it includes monetary policy meetings from the European and the US central banks while scheduled for the United Kingdom’s (UK) general election. Further, the US deadline to announce additional tariffs on China, December 15, also increases the importance of the week. While top-tier central banks are less likely to announce any changes to their present monetary policy, uncertainty surrounding the UK election and US-China trade deal keeps investors guessing.

As a result, risk sentiment stays sluggish at the start of the week. With this, the US 10-year treasury yields decline to 1.82% whereas Wall Street also refrained from the latest run-up.

On the economic front, China’s November month Consumer Price Index (CPI) and Producer Price Index (PPI) could offer immediate directions. The headlines CPI is expected to rise to 4.2% from 3.8% on YoY while likely declining to 0.1% from 0.9% on a monthly basis. Moving on, the PPI might recover to -1.5% from -1.6% earlier.

Technical Analysis

An inverted hammer on Monday signals reversal of the previous declines from $1,484. However, the safe-haven asset’s drop below the two-week-old rising support line, at $1,458 now, could recall sellers targeting November month low near $1,445.