Gold Prices Took A Jab From Improved Trade Talks And FED Actions

Gold Prices Took A Jab From Improved Trade Talks And FED Actions

Gold prices plunged once again in the global market as trade talks progress.

COMEX Gold Futures plunged from the recent high of $1304.00 (Day’s high on 10th April 2019), to mark a fourth consecutive fall in prices. COMEX Gold prices are now trading below $1300 at the present level of $1288.

The factor which is exerting pressure on gold prices is the building optimism among the global market participants over the U.S-China trade talks and its positive impact on the global recovery. The long-disputed bilateral disagreement or trade-war caused severe damage in the global economy previously, which in turn, propelled the gold prices to the level of approx. $1350 in February 2019.

However, in the present scenario, the optimistic outlook over trade talks, and recent comments by the United States treasury secretary, Steven Mnuchin, in the International Monetary Fund (IMF) meeting is putting pressure on the gold price.

Mr. Mnuchin mentioned that the U.S-China trade talks might be at its last round and is reaching a resolution. This further raised fear among bullion investors, which in turn, exerted tremendous pressure on the gold prices in the international market.

Dollar prices also experienced a jolt, with the building optimism among the market, as in the trade dispute the United States was holding superiority and many market players were hedging the impact of the trade war or bilateral disagreement between the two significant economies of the globe through the dollar.

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The improvement in the relation between the trade war duo marked a sell-off in the dollar market as well; the Dollar Index (DXY) dropped from the level of 97.52 (Day’s high on 2nd April 2019) to the level of 96.79 (Day’s low on 15th April 2019); however, the positive impact of the progressive trade talks soon became evident in the market through improved macroeconomic data (betterment in US manufacturing, China manufacturing, improved trade balance in China, etc). And, the dollar prices recovered from the level of 96.79 to hover around 97.

A recovery in dollar prices again exerted a pressure on gold prices and the gold prices remained low below the recent high level of $1304 (Day’s high on 10th April).

To gauge the direction of gold prices further, the market participants are eyeing on the demand of the United States president, Donald Trump, who lashed out on the Federal Reserve for keeping the interest rate unchanged and demanded a decline in interest rate environment. However, the FED responded entirely opposite to the president’s demand and signalled over a future interest rate hikes if the global economic conditions pick up. The hope of a potential rise in the interest rate environment, exerted pressure on gold prices.

The market participants are eyeing over the interest rate environment and analysing every word of the members of the Federal Reserve to gauge the direction of gold prices.


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