Gold prices continue to remain capped this Monday as investors receive the US-China trade deal with cautious optimism. For one, the text of the deal suggests that it is limited in nature and still allowed for a lot of conditions. For instance, the tariff rollbacks by the United States are still dependent on China ramping up agricultural purchases. The US is also expected to maintain some level of tariffs: 25% om $250 billion worth of Chinese imports to be exact. Tariffs will drop to 7.5% om some others.
Is a US-China Trade Deal Truly In Place?
According to the U.S. Trade Representative (USTR) Robert Lighthizer, the Phase 1 US-China trade deal is totally done and will increase US exports to China over two years by nearly 100%.
However, the sentiment of the market towards the deal is one of cautious optimism. There are concerns in some quarters that the tariff reductions are not as large as expected. Goldman Sachs top official indicated that the reduction was just about 50% of their baseline assumptions, and many legal and technical details are still nebulous.
These concerns have been enough to keep gold prices slightly higher today, but capped at resistance.
Gold prices are trading slightly higher, but XAUUSD remains capped by the 1479 price resistance. If the concerns about the technical and legal aspects of the trade deal continue or even expand, we may see more upside in gold prices. This will cause it to challenge the current resistance at 1479. A successful upside break of this resistance could then target the 1493 price area. Above this level, the previous highs of October 4 and November 1 located at 1515.2 could come into focus.
On the flip side, if there were to be increased optimism around the limited US-China trade deal and there are statements made to clear up some of the confusion in the markets concerning the technical aspects of the deal, we could see XAUUSD sold off, which targets the 11/26 Nov lows of 1450.60.
The situation continues to remain fluid as more details emerge.