Gold prices slid in Friday’s trading as the precious metal fell victim to the dollar’s strength. XAUUSD initially rallied from its opening price of $1,463.76 to $1,473.04 only to drop back down and finish the week at $1,462.11.
Positive US data and renewed hopes over the US-China trade negotiations dampened demand for gold last week. The US manufacturing PMI for November came in better than expected at 0.2% versus the -0.1% forecast. Meanwhile, the services PMI topped the 51.2 forecast when it printed at 51.6. The two reports printing over the 50.0 baseline suggests that both manufacturing and services industries are expanding.
Remarks from Chinese President Xi Jinping last Friday may have also contributed to the decline in gold prices. According to the head of state, he wants to reach a deal with the US. This news was also followed by a couple of reports released over the weekend which hint that negotiations could be going well.
First, it was said that China is looking to strengthen intellectual property (IP) rights. IP has been one of the larger issues that initially put the two countries in a deadlock. Second, U.S. national security adviser Robert O’Brien has also announced that a phase one deal could still be possible by 2019.
This may have led to gold prices gapping lower at the start of this week’s trading.
XAUUSD is currently trading within a descending channel when you connect the lower highs and lower lows from November 20. The exchange rate is at $1,461.45.
If risk appetite is sustained throughout today, the precious metal could drop to support at $1,456.38 where it bottomed last week. On the other hand, if the market’s mood switches to risk aversion, we could see XAUUSD rally to $1,467.87 where it found support on November 20 and is the 61.8% Fib level (drawing from the high of November 22 to today’s Asian session low).Download our latest quarterly market outlookfor our longer-term trade ideas.
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