Gold Prices Drop on Upcoming Trade Deal | Finance Brokerage
Gold prices remained in the red on Tuesday ahead of the upcoming trade deal between the US and China. The anticipation continued to support global stock markets, weakening demand for precious metals.
Spot gold fell by 0.3% to $1,543.21 per ounce after hitting a two-week low of $1,535.75 earlier in the session.
Gold futures for February contract were down by 0.4% to $1,543.85 per troy ounce.
The yellow metal reached its highest level in seven years last week following Iran’s rocket attack at two US-Iraqi bases. Such attacks were a response to the US’ drone strike that killed Iranian General Qassem Soleimani on January 3.
Safe-haven buying in precious metals later declined after the US and Iran refrained from breaking into an outright war.
Iran, however, continued to make headlines. The protests in the country over the downed Ukrainian passenger jet entered its third day.
Trading in the energy commodities market also eased.
US crude oil West Texas Intermediate (WTI) futures lost 0.3% to $57.88 a barrel. Meanwhile, Brent crude futures dropped 0.1% to $64.09 a barrel.
Phase One Trade Deal Cited as Headwind for Gold Prices
For now, the signing of an interim trade deal between the two economies is likely to weigh down gold prices.
The heated US-China tariff dispute had driven the yellow metal up by 18% in 2019.
With such strong global growth sentiment evident in markets around the world, and lack of geopolitical tensions to give support, gold’s price erosion is likely to continue, according to senior market analyst Jeffrey Halley.
Leaders will sign the Phase One trade deal on Wednesday. .
US Trade Representative Robert Lighthizer has said the Chinese translation of the trade accord was nearly finished. Then, it would be released before the signing ceremony tomorrow.
US Treasury Secretary Steven Mnuchin confirmed on Sunday that China’s commitments in the partial trade deal still requires the country to purchase $40 billion to $50 billion of US farm goods annually and a total of $200 billion of US products over the next two years.
Moreover, a source said China vowed to purchase $80 billion more products from the US over the next two years. It would also buy over $50 billion more in energy supplies.
China would also raise buying of US services around $35 billion over the same two-year period, the source added.
The US withdrew its decision to label China as a currency manipulator, as well. This decision came after China agreed not to devalue its currency to make its goods cheaper for foreign buyers.
The move came after Mnuchin said China made commitments to refrain from devaluation while promoting transparency regarding its exchange rates.
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