Gold Prices Shrink On Tariff Delay, Waning US-China Trade Spat

FILE PHOTO: A worker pours gold at the AngloGold Ashanti mine at Obuasi, Ghana, October 23, 2003.
(Photo: REUTERS/Luc Gnago/File Photo)

Gold Futures settled lower late Tuesday, collapsing sharply from their largest intraday output in over 6 years after Washington said it would hold off taxes on certain Chinese imports and set another round of meeting to avert a spillover that experts fear could damage the global economy.

Based on the latest observations by market strategists, investors are scampering back to equities as tensions between China and the US appear to be waning.

The refinement in trade sentiment was noted after US trade officials disclosed more taxes on China's products will be delayed until Dec. 15.

Selected goods are being taken away from the tax list based on safety, security, health, and other key elements and will not get a 10-percent tax, the American economic officials divulged.

The move comes as US Trade Representative Robert Lighthizer and Secretary of the Treasury Steven Mnuchin held talks with China's Vice Premier Liu He and his team, with the two sides agreeing to meet again in two weeks.

Gold prices saw a steep ascent above the $1,547 mark during extended sessions Tuesday, the highest intraday movement for a most-active trade since 2013, based on figures provided by FactSet, as traders monitor developments in Hong Kong, the aftershocks from Argentina's presidential elections, and concerns over the effects of Washington and China trade spat.

News of the US delay in taxes pushed prices of the yellow metal down as investors perceive a liquidation of safety assets (gold in particular) back into the mainstream stock market, and in the words of James Hatzigiannis, Long Leaf Trading Group senior associate, "I think gold will continue to shift downwards this week unless news of trade uncertainty is released this week."

In contrast, gold has been selling off as equity markets gear up to session peaks. For instance, December gold futures last traded at $1,509.61/ounce, falling 0.51%. The S&P 500, on the other hand, last traded at 2930 points, rising 1.69% on the day.

The vaunted yellow metal has also retreated after the US commodities price index surged 0.4% last month, in connection with Wall Street estimates, while it's fundamental reading, minus energy and food, grew 0.4%. Year-on-year, consumer prices were up 1.7% against a 1.5% advance the previous month.

Walsh Trading commercial hedging co-director Sean Lusk, in a recent discussion with Kitco News, warned that investors are highly sensitive to geopolitical banner stories and there was an escalating risk of a short-term correction.

Lusk also pointed out that because market sentiment has been quite dim in the last few days, the precious metal will also be sensitive to any changes in the global markets. "The equity market can transform in an instant. All it needs is one comment before prices start shifting the other way," Lusk emphasized.

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