The gold rally stalled, after a steep rise the COMEX gold futures took a U-turn from the level of approx. $1312 amid building trade optimism between the two significant economies of the globe. The long-standing bilateral disagreement between U.S-China is possibly reaching to a conclusion after successive rounds of trade talks between the delegation from Beijing and Washington.
The building optimism between these two economies is prompting investors in the global market over the betterment in the global economy, which in turn, is exerting slight pressure on gold prices.
However, as there are no official statements in the market, the significant impact of the trade optimism is not hampering the gold prices with greater magnitude, and past economic data suggest that the global economy is still in shackles, which in turn is providing cushion to the gold prices.
The development in the U.S-China relationship is still not clear among many players in the market; however, an official statement from either the respective presidents of both the nations or statements from the delegation involved in the trade talks is being looked at by the market participants.
Another factor which is exerting the pressure on the gold prices is the EU-Commission extension in the Brexit. The Eurozone leaders and the U.K. mutually agreed over a flexible extension of the Brexit deadline, which in turn, got extended from March to 31st October 2019. The extension in the Brexit deadline jolted the bullion market further exerting pressure on gold prices.
Apart from both these factors, a new factor emerged in the market; the United States Federal finally broke its silence and responded to the U.S. President Donald Trump’s demand of decreasing interest rate; however, not as Mr. Trump expected.
The minutes of the FED March meeting revealed that the Federal Reserve had left the room for a possible interest rate hike by the end of the year if the economic condition improves in the global as well as in the domestic economy.
The hope of a possible increase in interest rate exerted the pressure on gold prices, and the prices plunged from the level of $1312.
Gold prices seems to be moving on news events rather than the demand and supply dynamics; however, Russia and China are building their gold reserves to reduce the exposure to the dollar prices, which could trigger a demand dynamic in the market and should be monitored.
Any significant move in gold prices will be subjective to the accumulative outcome of the increased reserves of gold in China and Russia, the outcome of trade talks and where it takes the global economy, which initially got hampered over the bilateral disagreement of the two major economies of the globe and tariff war between them.
Large cap, gold miner Evolution Mining Limited (ASX: EVN), closed the market 1.07% down at A$3.690 on 11 April. Another gold player, Resolute Mining Limited (ASX: RSG) closed in red, plunging by 2.02%, closing at A$1.210.
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