Gold started the U.S. session under pressure amid reports of high-level trade talks over the weekend that sent U.S. equities to new record highs. However, last week's corrective lows in the yellow metal were never threatened and gold appears poised to close higher on the day.

Chinese Vice Premier Liu He spoke with Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer about a phase-one trade deal on Saturday morning. That conversation was said to have been "constructive," which launched stocks to new highs.

However, the seesaw doesn't stay on one side or the other for very long, and doubts about the likelihood of a trade deal surfaced pretty quickly.

“Beijing and Washington have absolutely no consensus on a wide range of issues, such as how many US agricultural products China shall buy, whether to revise China’s domestic law to protect intellectual property as requested by the US, and to what extent China can open up its financial industry to please both countries.” – Shi Yinhong, a prominent international relations specialist at Renmin University in Beijing via SCMP

Offering additional support to gold is the seemingly unending rise of tensions in Hong Kong. Police laid siege to Hong Kong Polytechnic University, trapping hundreds of protestors inside.

In addition, Chinese troops left their barracks to assist in "cleanup" operations, which included clearing roadblocks. However, the move was interpreted by many as a more ominous message. Fortunately, the protestors did not engage the troops.

“The deployment was primarily meant to send a clear and powerful signal to the protestors that the PLA could and would be deployed if the Chinese government should see a need to do so.” – Steve Tsang, a professor of Chinese governance at SOAS University of London via The Guardian

Certainly, the ongoing impeachment inquiry is keeping political tensions elevated as well. However this all shakes out in the end, it raises doubts about just about every ongoing policy initiative, including – but certainly not limited to – trade and the situation in Hong Kong.

Volatility is oftentimes indicative of a market extreme and gold may indeed be trying to forge a corrective bottom. A breach of last Thursday's high at 1474.65 would offer some encouragement, but a move above the 1488.18 retracement level would be a more telling technical signal.

In the meantime, gold remains defensive within the moderate corrective downtrend off of the September high at 1557.06. The more dominant longer-term trend is still bullish.

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