Gold Prices Down as Optimism Rises Regarding US-China Trade Deal

The trade war between the United States and China, the world’s two biggest economies, has resulted in major turmoil in the markets. However, optimism now prevails in the market that a new deal could well be worked out following the latest rounds of talks between the trade delegations of the two nations. In a fresh development, the price of gold dropped by 0.2% yesterday to hit $1485.86 an ounce, and it is another indication that optimism is rising in the markets with regards to a trade deal.

When there is uncertainty in markets, investors generally park their money in secure assets like gold, and over the course of the past months, gold has reached record levels. In order words, it is a hedge against market uncertainty, and the drop in the gold price indicated that investors are feeling optimistic about the markets again. An analyst at OANDA stated,

Gold is not moving on gold fundamentals; it is moving on whatever is going on with the trade situation. The trade deal was short on detail but is still going to be enough to probably support risk, and that will be negative for gold.

On Friday, the United States President Donald Trump spoke about the possibility of ending the protracted trade war. In another sign that would come as a positive for investors, he did not impose the fresh tariff hikes on Chinese imports as had been promised earlier. Stock markets in Asia moved up on the back of the news, and things are currently appearing far better. That being said, there have been positive noises about the end of the trade war earlier as well, but experts feel that it could be different this time around. In a note, OCBC Bank stated,

The positive headline is encouraging. However, we saw the same move before in April. This time may be different as timing could be the catalyst for both sides to go ahead with the talk without derailing the situation.

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