Gold prices settle higher to post a weekly rise of over 1%

December 14, 2019

New York (Dec 14)  Gold prices settled higher on Friday, buoyed by weakness in the dollar and a fall in bond yields, to tally a gain for the week, as traders struggled to sort out details of news that the U.S. and China have agreed to a phase-one trade deal.

The U.S. and China have reached an agreement on text of a phase one trade deal and will now move toward signing a deal as quickly as possible, Chinese officials said Friday. The U.S. will scrap tariffs on Chinese goods in phases, Vice Commerce Minister Wang Shouwen said.

President Donald Trump said Friday that the U.S. and China agreed to a phase-one trade deal and said tariffs that were scheduled for Dec. 15 on Chinese goods have been called off.

See also: U.S. and China Reach Phase One Trade Agreement

“It certainly is real progress, but the market is cautious of both sides given we have been this close before only to have China pullback from [an] ‘agreed to in principle’ deal,” Jeff Wright, executive vice president of GoldMining Inc., told MarketWatch.

However, gold likely found support from a “rewinding to some of the data earlier in the week,” such as the producer price index and Wednesday’s FOMC policy statement, he said.

Against that backdrop, February gold GCG20, -0.06%  rose $8.90, or 0.6%, to settle at $1,481.20 an ounce, the highest finish for a most-active contract since Dec. 5, according to FactSet data.. March silver SIH20, -0.07%, meanwhile, added 6.3 cents, or 0.4%, to $17.012 an ounce, logging a fifth consecutive sessions of gains.

For the week, gold rose 1.1%, while silver saw a 2.5% weekly rise, according to FactSet data tracking the most-active futures contract.

Market strategists had warned that dissipating geopolitical fears, including on Brexit and U.S.-China trade, remain downbeat factors for the yellow metal over a longer term.

“Gold is a bit anomalous as I had initially pegged gold lower on a tariff rollback trade deal, but with the tame U.S. inflation environment possibly keeping U.S. [yields] in check, gold may not necessarily have the blow-off bottom as a result of the trade deal,” wrote Stephen Innes, chief Asia market strategist at AxiTrader, in a daily note ahead of China’s press conference Friday.

“But in the absence of an absolute dovish Fed, downside risk remains elevated as cross-asset relocation into equities could intensify into the weekend even more so if the global growth rebound trade takes hold,” he wrote.

Meanwhile, U.K. Prime Minister Boris Johnson secured a decisive victory late Thursday that gives him a new five-year term after the Conservative Party won a general election.

Gold prices have been influenced by concerns about trade and uncertainties surrounding a U.K. election, as well as dovish stances by the Federal Reserve and the European Central Bank, which recently expressed support for lower rates for a longer period to support global economies.

The recent geopolitical moves, notably the U.K. election, has pushed one measure of the U.S. dollar firmly lower as the British pound GBPUSD, -0.0300% jumped overnight, but was weaker in Friday dealings. The ICE U.S. Dollar Index DXY, -0.23%, a gauge of the dollar against a basket of a half-dozen currency rivals, was down 0.2% at 97.181 as gold futures settled. A weaker buck can make commodities pegged to the currency more attractive to buyers using other currencies.

Meanwhile, bonds, which can compete with gold for buyers, were seeing yields retreat amid some doubts about the details of a China-U.S. deal. The 10-year Treasury note TMUBMUSD10Y, +0.00% was at 1.8218%.

U.S. stocks on Friday provided little guidance for haven gold, with benchmark stock indexes seeing mixed trading after the news of progress on a trade deal.

Among other metals on Comex, March copper HGH20, +0.14%  fell 0.6% to $2.781 a pound, for a weekly rise of 2.1%. January platinum PLF20, +0.23%  shed 1.7% to $928.80 an ounce, paring its weekly rise to 3.3%.

Palladium failed to follow through with earlier gains and settled with a loss, pulling back after reaching a record settlement Thursday. The March contract PAH20, +0.82%  fell by 1.2% to $1,891.60 an ounce for the session, but still rose 2.5% for the week.


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