US and China Set to Sign Phase One Deal
Gold prices continued to slide in yesterday’s trading as risk appetite continued to improve. XAUUSD fell from its opening price at $1,560.06 to close the day at $1,547.23. The market’s risk-on sentiment is mostly driven by the Phase One Deal between the US and China. Yesterday, the Chinese delegation led by Vice Premier Liu He arrived in Washington yesterday. They are set to sign the deal with their American counterparts tomorrow, January 15.
Gold Prices Weighed by Positive Chinese Data
Reports from China earlier this morning may also be the reason why gold prices are under selling pressure. It was reiterated that China would be buying up to 200 billion USD worth of US goods in the next four years. This is in exchange for tariff restrictions being loosened by the US on Chinese imports. Additionally, China reported a trade surplus of 46.8 billion USD which was higher than the 45.8 billion USD consensus. Both reports were conducive for risk appetite. For one, they alleviate uncertainties surrounding the trade war. Secondly, economic data suggests that the Chinese economy is doing well and could continue to fuel global growth.
US CPI Due Today
For today, gold prices may find some reprieve if US data comes in worse than expected. Remember that on Friday, XAUUSD traded higher after the US NFP failed to beat forecasts. We could see the same price action today if the CPI report, due at 1:30 pm GMT, miss the 0.2% consensus.
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Gold Price Outlook
On the 4-hour chart, we can see that XAUUSD has pared most of its gains back to the 50% Fib level (when you draw the Fibonacci retracement tool from the low of December 9 to the high of January 8). The 100 SMA could offer it support around $1,525.20 which also coincides with the area between the 50% and 61.8% Fib levels. If support there does not hold, gold prices could fall further to $1,491.80 where the 200 SMA is. This price also aligns nicely with the rising trend line from connecting the lows of November 26, November 29, December 9, December 12, and December 19.
On the other hand, a bullish engulfing candlestick in the 50% Fib level could mean that XAUUSD may not pullback any lower. It could signal that buyers are priming to push gold prices back up to their January 8 highs at $1,610.10.