Gold rebounds on renewed trade doubts after taking a hit on Friday’s optimistic headlines of a trade deal between U.S. and China. After surging on Friday, stock markets are heading down as investors grow pessimistic on the “handshake” deal.
On Friday, gold fell after it was reported that China had agreed to more than double its annual purchases of U.S. agricultural products to as much as $50 billion, while U.S. President Donald Trump agreed to hold off on another round of tariff increases set for this week.
This morning, the agreement seems less solid. Bloomberg is reporting that China wants to hold more talks in October to finalize the details of the “phase one” trade deal touted by Donald Trump before Xi Jinping agrees to sign it, according to people familiar with the matter.
Meanwhile, Reuters reports this morning that U.S. Treasury Secretary Steven Mnuchin says an additional round of tariffs on Chinese imports will likely be imposed if a trade deal with China has not been reached by the December 15th, the date for a new round of tariffs. Mnuchin added that he expected the agreement to go through.
Bullion fell 0.8% Friday to settle at $1,488.70 an ounce on Comex, the lowest closing price for the most-active futures contract since Sept. 30. The yellow metal climbed to a six-year high earlier this year as investors sought a safe haven from the trade dispute and economic and geopolitical uncertainty. Gold was still up 1.1% this month, through Friday. This morning, the December contract is up at $1,530
Silver decreased 1.3% Friday to settle at $17.37 an ounce on Comex. The December contract is down 1.5% in October. Both spot palladium and spot platinum advanced last week.
China’s exports and imports shrank more than expected in September, data from the customs administration showed Monday, indicating that the trade war and a slowdown in global trade have undercut demand. Exports dropped 3.2% last month from a year earlier, while imports fell 8.5% during the same period. Economists polled by Reuters had expected a 3% decrease in exports and a 5.2% reduction in imports.
Annual meetings by the World Bank and International Monetary Fund will be held this week in Washington, with a briefing on the world economic outlook set for Tuesday.
The U.S. government is closed Monday for the Columbus Day holiday, but financial markets are open. Economic news expected from the U.S. this week includes the New York Empire State manufacturing survey Tuesday and the Beige Book report on the 12 Fed regions Wednesday. Weekly jobless claims come out Thursday.
Speculation continues to grow 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 75.4% of investors think the Fed will reduce interest rates by 25 basis on Oct. 30, compared with 67.3% Friday. The probability of no change was 24.6% early Monday, compared with 32.7% Friday.
Investors also continue to watch the latest Brexit developments ahead of the U.K.’s scheduled departure from the European Union at 11 p.m. GMT on Oct. 31. The government’s plans for life after Brexit are expected to be outlined in a Queen’s Speech opening the new session of Parliament on Monday. Members will vote after the speech, and it’s possible for opponents to reject it, though Parliament hasn’t voted down a monarch’s speech since 1924. U.K. and EU negotiators are set to meet again Monday in Brussels ahead of a summit at the end of the week.
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