When all is said and done, gold faired pretty well this week, despite a myriad of market uncertainties on a number of fronts. While the yellow metal chopped around in a $28 range during the week, it posted a 1% weekly gain.
U.S.-China trade deal speculation, impeachment proceedings, a major election in the UK, Fed and ECB policy decision all exerted various levels of influence on the precious metals.
There was much speculation about a trade deal this week as the clock ticked down toward the December 15 deadline for additional tariffs. By Thursday there were reports that a Phase 1 trade deal was reached "in principle" and details trickled out on Friday.
According to Reuters, the U.S. will reduce some tariffs in exchange for China purchasing an additional $32 bln of American agricultural products over the next two years. Reportedly China will also buy additional U.S. manufactured goods, energy, and services.
Sounds like quid pro quo to me!
While new tariffs apparently won't be imposed on Sunday, the deal won't be formally inked until early January. A lot can happen over the next three to four weeks...
By a vote of 23-17, the House Judiciary Committee approved two articles of impeachment against President Trump. The full House is expected to approve the articles of impeachment along party lines on Wednesday next week.
At that point, the impeachment moves on to the Senate for trial. I don't know anyone who thinks the Senate will vote to convict and remove the President from office.
In the UK, the conservative Tory party won a sweeping victory based on their pledge to "Get Brexit Done." The Labour Party had its worst showing since 1935! With a strong majority led by Boris Johnson, Brexit is now likely to happen as soon as January 30.
The British pound reached a 19-month high this week, helping to push the dollar to fresh 23-week lows. Dollar weakness helped to keep gold underpinned, even as the good news on the trade front boosted risk appetite.
The resilience of gold this week is encouraging for the underlying uptrend. However, I feel like $1500 needs to be regained to really return confidence to the uptrend. The high from 04-Dec at 1484.07 provides good intervening resistance.
Both the Fed and the ECB held steady on rates in their last meetings of 2019. This was in line with expectations, but the Fed dot plot suggests the Fed is on hold through 2020, even as they remain concerned about the low rate of inflation.
The ECB is apparently on hold through next year as well. In her first press conference, new ECB President Cristine Lagarde emphasized that highly accommodative policy is still needed.
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