Gold starts this holiday-shortened week under modest pressure, establishing a new 9-session low. However, the range established in the previous two-weeks remains intact even as trade deal optimism is back on the rise.
China said over the weekend that it would increase the penalties for the theft of intellectual property. This has been a significant sticking point in negotiations, so Chinese movement on this issue has encouraged markets and eased risk aversion.
However, the struggle to come to terms on a small Phase 1 deal suggests just how difficult it will be to reach a broader Phase 2 agreement. While the optimism pendulum may have recently swung in favor of a Phase 1 deal, Phase 2 is likely to remain elusive.
President Trump suggested on Friday that he might veto the Hong Kong Democracy Act as a means to pave the way toward that Phase 1 agreement. Not surprisingly, the President is getting some flack for that statement and given the broad bipartisan support of the legislation in Congress, such a veto might easily get overridden.
“We have to stand with Hong Kong, but I’m also standing with President Xi.” – President Donald Trump
Over the weekend, prodemocracy candidates won major victories in Hong Kong district council election. This election was widely seen as a referendum on the democracy movement in Hong Kong, suggesting there is indeed broad support among the citizenry.
The results send a clear message to Hong Kong Chief Executive Carrie Lam; and to Beijing as well. How Beijing takes that message is very much in doubt. Arguably, it might be the pretense for heightened intervention in the semi-autonomous city.
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