In early Asian trading, spot gold fell sharply to below $1, 555 an ounce. Analysts pointed to a lull in tensions between the U.S. and Iran, as well as optimism about trade between China and the U.S. and the latest news from North Korea, which boosted risk appetite and weighed on gold. This week, investors will focus on the signing of the first phase of the trade deal between China and the United States and the latest developments in the impeachment proceedings of Donald trump. Of course, investors still need to keep an eye on further developments in the Middle East, where any sudden news could spur market volatility.
Gold just fell below $1,555 on fresh news from North Korea
Spot gold opened lower on Monday, losing the $1,560 / oz mark. The price of gold has just accelerated sharply in the short term, hitting as low as $1554.20 an ounce.
This followed the latest news on the situation in North Korea, which boosted risk appetite. In addition, the dollar index rebounded slightly, which also weighed on gold.
On Monday, Axios reported that the national security agency said U.S. President Donald Trump was in contact with North Korea.
Robert O ‘Brien, the US national security adviser, said contacts had been made with North Korea and that it had let them know that the US wanted to continue negotiations held in Stockholm in October and get the talks back on track with Pyongyang’s commitment to denuclearisation of the peninsula.
Mr. O ‘Brien also said he was cautiously optimistic that Kim Jong-un, North Korea’s supreme leader, had not delivered on his promise of a “Christmas present”.
Mr. O ‘Brien said North Korea had “promised Christmas gifts”. The President suggested that he give him a vase. We didn’t get a vase or any other kind of Christmas present. That seems positive.
Mr. O ‘Brien added: “all we know is that we were told we were going to get Christmas presents and they didn’t come. So I think that’s an encouraging sign. But that doesn’t mean we won’t see some form of testing in the future.”
The signing of the first phase of the china-us trade agreement
Current optimism about us-china trade is also weighing on gold prices. The big trade news this week will be the first phase of a trade deal that the United States and China are likely to sign on Wednesday.
At the invitation of the us side, 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 comprehensive economic dialogue, will lead a delegation to Washington from January 13 to 15 to sign the first phase of the economic and trade agreement with the US side, said Gao Feng, spokesperson of the ministry of commerce at a regular press conference on January 9. The two teams are in close communication on specific arrangements for the signing of the agreement.
After 18 long months of negotiations, the signing of the first phase of the agreement is finally a sign of certainty.
China and the United States have previously gone through necessary procedures such as legal review, translation, and proofreading, and communicated closely on the signing of the agreement. According to the statement of the Chinese side, through the joint efforts of the economic and trade teams of the two countries, the two sides have reached an agreement on the text of the first stage economic and trade agreement based on the principles of equality and mutual respect.
The signing ceremony will take place at the White House at 11 a.m. Wednesday. About 200 people, including representatives of major U.S. trade groups, will attend the signing ceremony.
President Donald Trump told ABC television on Thursday that the deal would be signed on January 15 or “shortly.” Trump first announced on twitter on December 31 that the deal would be signed on January 15.
Trump tweeted on Dec. 31 that he would sign a “phase I” trade deal with China on Jan. 15 while senior Chinese representatives were at the White House. Mr. Trump also said at the time that he would then travel to Beijing to start “phase two” negotiations.
Mr. Trump wrote at the time: “on January 15, I will sign the first phase of our very large and comprehensive trade agreement with China. The ceremony will take place at the White House. High-level Chinese representatives will be present. At some later date, I will go to Beijing and start the second phase of negotiations there!”
The Wall Street Journal reported on January 11 that the United States and China have agreed to launch a new semi-annual dialogue to promote economic reform and resolve disputes. The two sides will announce the new dialogue mechanism on January 15.
“It is important to note more details about the deal itself when it is signed,” said Andrew Hunter, U.S. economist at capital economics.
“At this point, what we do know is that the bulk of the deal is the US agreeing to no more tariffs and China agreeing to increase its purchases of US agricultural products,” Hunter said. We are looking for more details on this. It is not clear when they will release the full text of the agreement.”
Keep an eye on trump’s impeachment proceedings
House Speaker Nancy Pelosi said on Friday she would direct the house of representatives to send articles of impeachment to the Senate this week. That means the Senate could open the trump impeachment trial as early as this week.
“I have asked Judd Nadler, the chairman of the judiciary committee, to prepare a resolution appointing the executive next week and to send articles of impeachment to the Senate,” Pelosi said in a letter to her House colleagues.
Earlier, Pelosi repeatedly delayed plans to introduce articles of impeachment for President Donald Trump after failing to reach an agreement with the senate on the terms of his impeachment trial.
But pressure is mounting on Ms. Pelosi to file articles of impeachment, not only from Republicans but also from Democrats. Before the articles can be submitted, the house still has to vote on the names of the administrators or members of the house who will act as prosecutors in the Senate trial of the President.
On December 8, 2019, the US house of representatives passed two articles of impeachment against President Trump, namely “abuse of power” and “obstruction of congressional investigation”. However, because of her dispute with the senate, Pelosi did not immediately refer to the articles of impeachment to the Senate for trial.
On December 18, the democratic-controlled U.S. house of representatives voted to pass two articles of impeachment against Trump, formally accusing him of abusing his power and obstructing Congress. Mr. Trump has become only the third President in US history to be impeached by the house of representatives.
On Jan. 11, Mr. Trump again began the “tweeting wave,” railing against Ms. Pelosi and the Democrats, reiterating that the democratic hearings were “unfair and biased” and “did nothing but prove my complete innocence.” Mr. Trump also repeated his claim that ms Pelosi would be “the worst speaker of the house in history”.
In a senate trial, if more than a two-thirds majority finds President trump guilty, he will be fired and vice President pence will take over. But if no more than two-thirds of lawmakers believe he is guilty, he will be fully pardoned and remain in office.
In the current senate, republicans hold 53 seats, Democrats 45 and independents two. With the vast majority of Republicans saying they support Mr. Trump, the chances of him being impeached from office are slim.
Keep an eye on these two heavyweights
The US is set to release its most important economic data this week, with December’s consumer price index and retail sales the most closely watched.
Analysts said weaker-than-expected inflation and retail sales data could add to the bearish tone for the dollar by heightening concerns about the outlook for the U.S. economy.
“The most important thing is CPI,” said Bart Melek, head of global strategy at TD securities.
Melek said any disappointing economic data would have a positive impact on gold.
Mitsubishi economist Jonathan Butler explains that the data are crucial because they provide insight into the future direction of monetary policy for the fed, which still has room to cut rates further or launch quantitative easing.
“These Numbers will be a good indicator of the strength of the U.S. economy as we enter a new decade,” Butler said. The fed will be watching this closely. The fed will meet later this quarter and its forward guidance will be interesting. They still have some room to maneuver on interest rates. “We expect rates to stay the same or maybe even lower, which could be augmented by some form of quantitative easing.”
While tensions between the United States and Iran have cooled, analysts are keeping a close eye on any further developments and their impact on markets.
Butler said geopolitical and trade concerns should continue to support gold as a safe-haven investment, with prices averaging around $1,600 an ounce this year.
“Last week demonstrated the safe-haven appeal of gold, especially after the Iranian airstrikes,” Butler said.
Mr. Melek expects prices to edge lower this week, but remains optimistic about gold’s long-term prospects. ‘it’s still very likely that tensions will reignite, which would be good for gold,’ Mr. Melek said.