Gold Prices Lower on Renewed Hopes of a US-China Trade Deal

Gold prices traded lower yesterday as market sentiment shifted from risk aversion to risk appetite. XAUUSD opened at $1,477.06 and peaked at $1,483.73. Then, during the European session, demand for the safe haven asset dampened. XAUUSD traded lower to an intra-day low of $1,471.26 before it settled at $1,474.00 by the New York session close.

The Market’s Mood Switched from Risk-Off to Risk On

Initially, market participants were worried about US-China trade negotiations. US President Donald Trump had previously announced during an impromptu press conference that he was in no hurry to strike a deal with China. However, a report from Bloomberg yesterday said that the two countries were close to finalizing a phase one deal. In fact, despite the Hong Kong rights bill and the Uighur Act of 2019, they may announce an agreement before the December 15 deadline.

 

Disappointing Jobs and Services Data from the US

Sellers also seemed unfazed by the negative reports that were released from the US yesterday. For one, the ADP report for November printed at 67,000 and sorely missed the forecast at 137,000. On top of that, the ISM non-manufacturing PMI report for November also disappointed expectations. It hinted that growth in the services industry was slowing. The index came in at 53.9 versus the 54.5 forecast. This figure was lower than the reading for October at 54.7.

Today, there are no top-tier economic reports from the US. This means that gold prices will likely take their cue from market sentiment. Remember that yesterday was not the first time we’ve heard officials say that the US and China are close to signing a deal. Market participants may want to hear more tangible details moving forward in order for risk appetite to be sustained.

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Gold Price Outlook

The price action on gold prices yesterday allowed XAUUSD to pull back some of its gains to the 38.2% Fib (drawing from the low of December 2 to the high of December 4). This is also a previous support level with the commodity bottoming out at this price a few times in October 2019. The area also coincides with the neckline resistance of a double bottom chart pattern. In forex trading, this is widely interpreted as a bullish signal. The fact that sellers were unable to push gold prices below the $1,450.00 hints that there are enough buyers in the market.

If XAUUSD rallies past resistance at yesterday’s high around $1,483.98, it could mean that gold prices may soon test its November highs around $1,514.36. On the other hand, a strong bearish close below yesterday’s low around $1,471.22 may mean that XAUUSD may be on its way to support around $1,452.63.Download our latest quarterly market outlook for our longer-term trade ideas.

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