Negative news coming from all over proved to be positive for gold during the week.
Weakness in global growth, lack of clarity in US China trade dispute, weak economic data coming from Asian markets, negative Asian equities, Powell’s speech, unrest in Hong Kong and other ongoing risks, together proved to be good support for gold-
Trade Dispute– On the Sino-U.S. trade front, tensions seemed to have escalated again as the Wall Street Journal reported that the trade talks have stalled over agriculture purchases.
The Journal cited sources and reported that China is unwilling to quantify its farm purchases, a commitment China made as part of a phase one trade agreement.
The news dented hopes that the phase one deal will be signed sooner rather than later, according to the article.
China is also resisting U.S. demands to make reforms on forced technology transfer, which the Trump administration has previously said would be addressed in future trade deals with Beijing.
Furthermore, President Trump revealed that “we were so close to a deal” while speaking at the Economic Club of New York, and went onto emphasized the administration’s approach to “tell it to everybody: if we don’t make a deal, we’re going to substantially raise those tariffs.”
Weak Data numbers- A set of worse-than-expected economic data were cited as providing support for the yellow metal.
Gold prices gained on Thursday in Asia following the release of weak economic data coming out from China, Japan and Australia. Sino-U.S. trade uncertainties also attracted some safe-haven demand.
Powell’s Speech- fresh remarks from Fed officials suggested that the central bank will move to the sidelines and endorse a wait-and-see approach at its next interest rate decision on December 11 as Chairman Jerome Powell told US lawmakers that “the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth.”
U.S. Federal Reserve Chair Jerome Powell on Wednesday told the Joint Economic Committee that negative interest rates sought by Trump are not appropriate for the U.S. economy right now.
He also added that the central bank would probably stop (with interest rate cuts) where it is unless there is a “material” change in the economic outlook.
Chinese data– Gold is being supported as the Chinese industrial production and retail sales came way below expectations. In China, October’s industrial output, retail sales and fixed-asset investment all came in worse than forecast, while Japan’s Q3 GDP also grew less than expected.
Asian equities- Asian stocks fell after China’s industrial output grew significantly slower than expected in October, as weakness in global and domestic demand and the drawn-out Sino-U.S. trade war weighed on activity in the world’s second-largest economy.
Unrest in Hong Kong- Anti-government protesters in Hong King, paralysed parts of the city for a fourth day, forcing school closures and blocking highways and other transport links and creating further unrest.
Deterioration in Hong Kong this week will further support gold but what are even more impactful are the ongoing trade talks.
All the above mentioned influencers have been playing an active role in the movement of gold prices. In the long term, the backdrop is pretty conducive. With the global central banks being accommodative, gold will get its support.