Gold modestly up this morning on less than positive economic news out of China. The yellow metal regained some of the ground it lost after slipping Friday on a better-than-expected U.S. jobs report.
The positive job number reduces the urgency for a trade accord with China and helps justify a Federal Reserve decision — widely expected Wednesday — to keep interest rates unchanged.
The strong labor market would allow the U.S. to win the trade war with China by giving the administration the ability to walk away from negotiations, according to CNBC’s Jim Cramer. Gold increased in the first part of last week as a trade deal between the U.S. and China appeared more distant. The metal skyrocketed earlier this year as the sides squared off. The next U.S. tariff on Chinese goods is scheduled to kick in Dec. 15.
The effects of the trade standoff were apparent in Chinese export data for November, released Sunday. Total exports for the month dropped 1.1% year on year, and they were down 23% to the U.S., customs administration data showed. It was the worst showing for exports to the U.S. since February and the 12th straight monthly decline, Bloomberg reported.
Investors watching the Fed’s policy meeting this week are likely to focus on the economic outlook for next year and beyond and on future rate cuts, Reuters reported. While the Fed has cut interest rates at the past three policy meetings, the CME FedWatch Tool showed a 99.3% probability that the Federal Open Market Committee would keep rates unchanged Dec. 11, while there were 0.7% odds on a hike. The European Central Bank is also set to meet this week.
February gold futures dropped 0.5% last week to settle at $1,465.10 an ounce on Comex after falling 1.2% Friday. Currently, the February contract is up at $1,468.20.
Speculators boosted bullish positions in Comex gold in the week ended Dec. 3, data from the Commodity Futures Trading Commission’s Commitment of Traders report showed Friday.
Silver fell 3% last week, with the March futures contract settling at $16.60 an ounce on Comex. Futures slid 2.7% Friday. Spot palladium soared 2.1% last week while spot platinum was little changed.
Looking further into the future, a note from Goldman Sachs on Friday gives a strong case for Gold in the coming year, standing by its forecast that gold will climb to $1,600 in 2020. “Gold cannot fully replace government bonds in a portfolio, but the case to reallocate a portion of normal bond exposure to gold is as strong as ever,” Goldman analysts including Sabine Schels said in a note Friday. “We still see upside in gold as late cycle concerns and heightened political uncertainty will likely support investment demand” for bullion as a defensive asset.
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