admin The US-China trade struggle has been concerned financial markets for months, but of late, more volatility has been seen as players react to every statement and try to assess the possibility of a ceasefire in the prolonged tariff war.
Equity markets fell on November 21 as trade deal could slide into next year. A day earlier, we did see some improvement in risk sentiment after China’s chief negotiator Liu He said he was “cautiously optimistic” about reaching a phase one trade deal with the US.
Gold has also been affected by the uncertainty. Gold price slumped to a three-month low earlier in November as encouraging statements from the US and China boosted expectations that a deal was in sight. The metal, however, recovered from the lows, as conflicting signals raised some doubts about a deal.
While the price is off lows, it is still far from the coveted $1,500/oz level and this shows scepticism about price direction.
The biggest hurdle for gold in the near term is the US-China trade dispute. Gold investors are unlikely to flock in until there is even a minute possibility of an agreement. Market players are now eyeing the December 15 deadline when the new US tariffs on Chinese goods come into effect.
Gold’s slow price movement and equity market’s outperformance has caused investors to exit the metal. Weakening investor interest is evident from the exchange-traded fund (ETF) outflows as well as a drop in speculative positions.
Based on data, gold holdings with global ETFs stand around 2,295 tonnes, down 40 tonnes from recent highs.
Latest CFTC data shows that non-commercial traders for gold futures cut net long position for the first time in four weeks. So, if significant improvement in risk sentiment then ETF outflows could intensify as investors can see better investment options. Despite recent outflows, global ETF gold holdings are still up by about 280 tonnes since the start of the year.
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