International spot gold was trading at $1,557.00 an ounce in early Asian trading on Thursday. Last trading day the gold price all the way to start the shock rebound trend, at the beginning of this week two consecutive trading days after the rebound closed up, now continue to maintain the shock upward trend. Despite the formal signing of the first phase of the trade agreement, investors still have some concerns about the future of trade. With most of the details already known to the market, investors expect some hurdles in the second phase of the signing process. Meanwhile, the situation in the Middle East remains a “time bomb”, the market is still skating on thin ice and buying gold as a safe haven is not surprising. Meanwhile, unexpected news from Russian politics overnight briefly raised the risk aversion of the market, with prime minister Dmitry Medvedev announcing the resignation of the entire Russian government and President Vladimir Putin signing the resignation of the government, which briefly caught investors off guard. Gold under the combined force of multiple factors to maintain strong resilience, still maintain the momentum of the rebound shock.
Historic moment! China and the United States officially sign a phase I trade agreement. Why didn’t gold go up instead of down?
China and the United States officially signed the first phase of the trade agreement in the early hours of Thursday (January 16) Beijing time (Beijing time). The signing ceremony of the first phase of china-us economic and trade agreement was held in the east room of the White House. Liu He, a member of the political bureau of the communist party of China central committee, vice-premier of the state council and Chinese leader of the china-u.s. comprehensive economic dialogue signed the agreement and delivered a speech with U.S. President Donald Trump.
Addressing the signing ceremony of the first phase of the economic and trade agreement between China and the United States, Liu He said that the conclusion of the first phase of the economic and trade agreement will benefit China, the United States, and the whole world. Liu said that China will open wider to the outside world.
Liu stressed that after the signing of the agreement, China and the United States should make joint efforts to uphold the principle of equality and mutual respect, strictly abide by the agreement, accommodate each other’s core concerns and work hard to implement the first phase agreement.
China and the United States have agreed that the United States will honor its commitment to phase out tariffs on Chinese products and move from raising tariffs to lowering tariffs.
The first phase includes nine chapters covering intellectual property rights, technology transfer, food and agricultural products, financial services, exchange rates, and transparency, trade expansion, bilateral assessments, and dispute settlement.
China’s three core concerns (eliminating all tariffs, making trade procurement figures realistic, and improving the balance of the text) and two principles (WTO rules and market principles) are embodied in the agreement, while the US’s core demands are positively addressed.
According to People’s Daily, the client, the two sides made in-depth discussions on strengthening the protection of intellectual property rights, in the commercial secret protection, and drug-related intellectual property rights, patent validity of extension, geographical indications, e-commerce platform of piracy and counterfeiting, piracy and counterfeit products production and export, hit the malicious registration of trademarks and strengthening law enforcement and application of intellectual property rights agreement.
In fact, even before the signing of the first phase of the trade agreement on January 15, the United States had shown goodwill by dropping its designation of China as a currency manipulator. It was seen as a gesture of reconciliation before the deal was signed.
The US Treasury on Monday formally dropped its decision to label China a currency manipulator last year, in what was seen as another sign of a thaw in us-china relations.
The United States and China have signed a preliminary trade agreement that would lower some tariffs and encourage China to buy more American goods and services. But the deal would retain a 25 percent tariff on $250 billion worth of Chinese industrial products and components used by U.S. manufacturers.
Us stocks gave up most of their gains after a rally on news of a first-phase trade deal between the US and China. The market has already digested the news ahead of time and there are worries about the future. Despite the signing of the first phase of the trade agreement, the United States has retained tariffs on some Chinese goods.
Gold maintained its strong rally on the news, peaking at $1558.05 an ounce in New York.
Sumitomo Mitsui said gold rose instead of falling as the us-china trade agreement was formally signed because it was already priced in the market.
But market analysts pointed out that taken as a whole, this is undoubtedly an important development in the trade situation between China and the United States, and could be an important turning point in future relations.
Edward Moya, the senior market analyst at OANDA in New York, said people expect trade concerns to remain because “we’re not going to see a complete elimination of tariffs.” The risk will support gold in the short term, which could rise to $1,580 in the coming weeks, but should stay at $1,540 for now.
“The market is still uncertain about a deal between China and the United States, while the weakness of stocks and the U.S. dollar have also supported gold prices,” said Commerzbank analyst Eugen Weinberg. “The fact that tariffs will not be lowered further until after the U.S. elections in November will not help to reassure the markets.”
The focus will then shift to the second phase of the economic and trade agreement, which U.S. Treasury Secretary Steven Munchin said is likely to focus on technology and cybersecurity, which has long been a sticking point between the two major economies.
The resignation of the entire Russian government leaves room for Mr. Putin to make significant constitutional reforms
The Russian government has resigned to make room for major new constitutional reforms, the Russian state news agency quoted prime minister Dmitry Medvedev as saying Wednesday.
The report gave no further details, other than to say that Russian President Vladimir Putin thanked the Medvedev administration for its work. The move was reportedly aimed at enabling Putin to implement the sweeping constitutional reforms he had mentioned in his annual speech a few hours earlier.
“For my part, I also want to thank you for all you have done at this stage of our work together, and I want to express my satisfaction with the results that have been achieved,” Putin told a meeting of ministers, according to TASS.
Mr. Putin thanked members of the government for their joint efforts, “although not everything has been resolved”.
The news came shortly after Mr. Putin delivered his annual address to lawmakers. Putin proposed a referendum on constitutional reforms that would shift power from the President to the prime minister and parliament. If Mr. Putin steps down in 2024, that could limit the power of his successor.
According to TASS, Medvedev said, “after the adoption of these amendments… Not only the constitutional provisions but also the balance of power, the executive, legislative and judicial powers, are going to change dramatically.”
Russia’s government consists of a prime minister, deputy prime ministers, federal ministers, and their ministries, in line with the western cabinet-style structure. Yet the political system in Moscow is widely seen as authoritarian, with Mr. Putin holding most of the power.
Putin has led Russia for 20 years as prime minister or President, who is barred from serving more than two consecutive terms under Russia’s current constitution. But with his fourth term ending in 2024, the latest move could be a way for him to circumvent or abolish the rule altogether.
The dollar briefly rose nearly 400 points against the Russian ruble on the news, before falling nearly 250 points to trade at 61.7. At the same time, the news also led to a spike in risk aversion, giving gold a boost and accelerating its rally.
Timothy Ash, the senior emerging markets strategist at Bluebay Asset Management, said the changes could be seen as an attempt by Putin to refresh the situation with a new prime minister and a new government. They will focus more on reforms to improve the efficiency with which governments promote economic growth and improve living standards.
Us’ scary data ‘hits watch out for market volatility
At 21:30 Beijing time on Thursday (January 16), the US will release the monthly retail sales rate for December, known as the “scary data”. Expectations were 0.3 percent, up from 0.2 percent, indicating confidence in the December retail season.
Recent U.S. CPI and PPI data for December fell short of expectations, and retail sales data could further understate low inflation.
Brady said the fed will not raise interest rates for 10 years to avoid negative rates, as inflation has failed to pick up after three consecutive fed rate cuts in 2019.
Both Dallas fed President Robert Kaplan and Philadelphia fed President Richard Harker were more optimistic about the outlook for inflation on Wednesday, saying it could exceed 2 percent for some time. Fed governor Paul Bowman will also make a speech today, and investors should watch for comments on inflation.
If U.S. retail sales data are better than expected, the dollar will get a boost and gold will suffer. On the other hand, if the data falls short of expectations, the dollar will face more downward pressure and gold will get a boost and rebound further.