Gold set a fresh five-week high in early U.S. trading on Thursday but was quickly back on the defensive as market focus returned to the trade war. President Trump did not disappoint and his message of optimism triggered fresh risk appetite, sending stocks soaring to new record highs.

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" - President Trump via Twitter

As it turned out, this time there was apparently some substance behind the optimism. Late in the day, it was reported that President Trump signed off on a Phase 1 trade deal that will avert the additional tariffs that were slated to be imposed on China this Sunday.

According to Bloomberg, terms have been agreed to, but a formal document has yet to be signed. I suppose you can either interpret that as a "done deal,' or there's still a possibility that the deal won't get signed.

Gold retraced nearly all of Wednesday's gains, leaving the yellow metal entrenched in the lower-third of the recent range. That being said, key supports remain protected at this point. Perhaps gold is waiting to see if ink actually makes it to paper or not.

U.S. PPI came in weaker than expected, further highlighting the Fed's expressed concerns about weak inflation. Most notably, annualized core PPI fell to 1.3% from 1.6% in Oct.

It seems the cuts from earlier this year have not been sufficient to stoke inflation. As I suggested in yesterday's post, it strikes me as far more likely that the Fed's next move is another rate cut rather than a hike.

If talk of easier policy starts circulating immediately after the Fed pretty adamantly indicated they were on hold through 2020, gold is likely to catch a bid. However, a rebound above $1500 is needed to return confidence to the underlying uptrend.


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