Gold eases on renewed trade hopes as the standoff between the U.S. and China NOW appears to be on a positive track. Precious metals are now awaiting reaction to the next potential market mover, the release of this afternoon’s FOMC minutes.
Late yesterday, gold got a headwind when tariff talks had seemed to worsen in the leadup to talks between the two nations Thursday and Friday in Washington. But now, Bloomberg is reporting that China is still open to agreeing to a partial trade deal, citing an official with direct knowledge of the talks. The headline boosted U.S and Eurozone stock markets and took a bit of shine off the yellow metal.
Bullion was little changed Tuesday, settling at $1,503.90 an ounce on Comex. Gold is up 2.1% so far this month. This morning, the December contract is hanging tough at $1,512.30.
The Dow Jones Industrial Average tumbled more than 300 points Tuesday on the trade tensions. A 30% tariff on $250 billion in Chinese goods kicks in Oct. 15 if the talks are unsuccessful, MarketWatch reported. And, earlier this week, the U.S. blacklisted 28 Chinese companies because of their alleged role in human-rights violations against the Uighur Muslim minority.
The economic impact of the standoff is starting to be felt. Kristalina Georgieva, the new head of the International Monetary Fund, on Tuesday warned that the world is looking at a “synchronized slowdown” due to trade tensions versus a “synchronized upswing” two years ago, Bloomberg reported. The IMF will lower its projections for global growth for both 2019 and 2020 at its annual meetings in Washington next week, she said, with 90% of the world seeing slower growth.
Speculation has grown that the U.S. Federal Reserve will cut interest rates for a third consecutive time when policy makers meet at the end of this month. The CME FedWatch Tool shows that 83.9% of investors think the Fed will reduce interest rates by 25 basis on Oct. 30, compared with 77% a week earlier. The probability of no change was 16.1% early Wednesday, compared with 23% the previous week.
Fed Chairman Jerome Powell said in a speech Tuesday that the Fed isn’t following a preset course but will consider the data and is committed to supporting an economic recovery. The central bank will soon start growing its balance sheet again, he said.
The minutes of the last Federal Open Market Committee meeting will be released later today at 2 pm. EDT. Investors are expected to scour them for clues on future policy moves. Meanwhile, the U.S. weekly jobs report and U.K. monthly GDP numbers come out Thursday.
Investors also continue to watch the back and forth between the White House and Congress on the impeachment inquiry and the latest Brexit developments. Either could help set a direction for precious metals used as a hedge against uncertainty.
The Trump administration said Tuesday that it won’t cooperate with the impeachment inquiry — including demand for documents and testimony. And a Brexit deal between the U.K. and the European Union is “essentially impossible” after a call between U.K. Prime Minister Boris Johnson and German Chancellor Angela Merkel, the BBC reported, citing an unidentified person close to the prime minister.
Silver increased 0.9% Tuesday to settle at $17.70 an ounce on Comex and the December contract is up 4.1% in October. Both spot palladium and spot platinum also advanced.
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