Gold extends weakness as stock markets cheer US-China trade optimism

GOLD prices eased on Monday, extending falls for a third session as optimism surrounding USChina trade talks increased risk appetite, while a slight uptick in the dollar also weighed on prices.

Spot gold dropped by 0.2% to $1,486.91 per ounce as of 0544 GMT, having shed 1% in the previous week. US gold futures inched up 0.2% to $1,491.20 per ounce.

“Gold is not moving on gold fundamentals, it is moving on whatever is going on with the trade situation,” OANDA analyst Jeffrey Halley said.

“The trade deal was short on detail, but is still going to be enough to probably support risk, and that will be negative for gold.”

BIGGEST STEP SO FAR

US President Donald Trump on Friday outlined the first phase of a deal to end the protracted SinoUS trade war and suspended a threatened tariff hike, the biggest step by the two countries in 15 months.

Asian stock markets cheered the news, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.5%.

“The positive headline is encouraging. However, we saw the same move before in April… This time may be different as timing could be the catalyst for both sides to go ahead with the talk without derailing the situation,” OCBC Bank said in a note referring to the US-China trade talks.

Singapore’s central bank eased monetary policy for the first time in three years on Monday, with the city-state’s economy narrowly dodging recession in the midst of the long-drawn trade war between the world’s two biggest economies.

Meanwhile, markets await Britain and the European Union’s talks later in the day, ahead of a summit on Thursday and Friday. Both parties said that a lot more work would be needed to secure an agreement on Britain’s departure from the bloc, scheduled for Oct. 31.

Gold is generally used by investors as a hedge against political and financial uncertainty.

“We remain optimistic on bullion prospects as central banks enact for monetary policy easing programs over looming downside risks in the global economy,” Phillip Futures analyst Benjamin Lu said in a note.

Among other precious metals, silver inched 0.1% higher to $17.58 per ounce, while platinum was little changed at $889.90.

Palladium dipped 0.1% to $1,697.55 an ounce, after hitting a record high of $1,705.84 on Friday. —