Gold Dips as China-US Tariff Spat Eases

Gold has started the new trading week with losses. In Monday’s North American trade, the spot price for one ounce of gold is $1289.63, down 0.22% on the day. It’s a very quiet day on the release front, with no key indicators on the schedule. The sole event is a speech from FOMC member Raphael Bostic. On Tuesday, the US releases Richmond Manufacturing Index.

After weeks of an escalating trade war between the US and China, there was a breakthrough of sorts on Sunday. Treasury Secretary Steven Mnuchin announced that the two sides had made significant progress and the trade war was being ‘put on hold’. This has resulted in stronger risk appetite and has pushed gold prices lower in the Monday session. Just last week, the White House sounded pessimistic about a deal being reached with China. The two economic giants had exchanged stiff tit-for-tat tariffs in recent weeks, raised fears of a bilateral trade war between the two largest economies in the world. The respite in the rhetoric and tariffs means that the two sides can now tackle the US trade deficit with China, which President Trump has long complained is a result of a non-level playing field with China. The news that the sides had backed down has pushed the dollar and stock markets higher.

It’s a quiet start to the week, with no major US data releases until Friday. In the meantime, markets will be keeping a close eye on the Federal Reserve, which will release the minutes of its policy meeting earlier in May. The Fed did not raise rates at the meeting, but a strong US economy has raised expectations that the Fed will press the rate trigger in June – according to the CME Group, the odds of a June increase stand at 95%. The markets will be looking for some guidance from the May minutes, and is the minutes are hawkish, traders can expect the dollar to post gains against its rivals.

XAU/USD Fundamentals

Monday (May 21)

• 11:30 US FOMC Member Rafael Bostic Speaks

Tuesday (May 22)

• 10:00 US Richmond Manufacturing Index. Estimate 9

*All release times are DST

*Key events are in bold

XAU/USD for Monday, May 21, 2018

XAU/USD May 21 at 11:30 DST

Open: 1292.60 High: 1292.60 Low: 1282.09 Close: 1289.63

XAU/USD Technical

XAU/USD edged lower in the Asian session. The pair lost more ground in European trade but recovered these losses. XAU/USD is steady in the North American session

• 1285 was tested earlier in support and is a weak line
• 1307 is the next resistance line
• Current range: 1285 to 1307

Further levels in both directions:

• Below: 1285, 1260 and 1236
• Above: 1307, 1337, 1375 and 1416

OANDA’s Open Positions Ratio

In the Monday session, XAU/USD ratio is showing long positions with a strong majority (69%). This is indicative of trader bias towards XAU/USD reversing directions and moving to higher ground.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.