The gold market found support overnight on the weaker dollar, which has fallen to its lowest level since August 28th. The trade is looking ahead to FOMC meeting next week, and the ECB's dovish stance yesterday seems to open the door for a rate cut.
Equities markets are trading at six-week highs and approaching their all-time highs from this summer, which would normally draw buyers away from the precious metals.
President Trump stated yesterday that while he prefers a comprehensive trade deal, he will not rule out the possibility of an interim agreement. Both sides of the dispute have softened their approach ahead of the trade talks next month, with the US postponing some tariffs and China buying US soybeans.
The gold market seems to be putting aside the risk-on mood of the marketplace and the loss of safe haven buying and is instead focusing on the weak dollar ahead of Fed meeting.
Gold and silver rallied sharply off ECB news on Thursday and then set back almost as quickly with the renewed optimism over US-China trade relations. The ECB meeting was positive for the metals, as the Bank cut rates by an expected 10 basis points and also announced that they would start a QE program that would buy 20 billion euros worth of bonds per month.
The ECB cut its deposit rate to a record-low -0.5%, while also promising rates would stay low for longer. At the post-meeting press conference, however, outgoing ECB President Draghi said that "it was high time for fiscal policy to take charge" and that "concerns over side-effects of extraordinary policy were very well placed."
The trade may be viewing those comments as an indicator that this set of easing measures may be as far as the ECB is willing to go right now, and metals traders may have taken this as a negative. All of this seems to set the market up for more choppy action until the FOMC meeting or until the next set of trade talks or the next blowup over trade, whichever comes first.
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