- Gold is offered at the start of the week below the 21-4hr MA.
- Geopolitical headlines are risk-friendly and weigh on the yellow metal.
Gold is trading around $1,460, weighed in the open by a series of pro-risk appetite headlines and by a US dollar which has garnered demand on positive domestic data. Prices fell at the start of this month, dropping close to a 5% slide to around $1,445 before rebounding to test $1,480, picking up on risk-on and risk-off themes and money flows. Predominately, it has been trade and Brexit at the forefront of the geopolitical themes as described in this week’s Asia open: Recap of latest developments as risk-on tones emerge
Geopolitical headlines favour downside in gold
The latest headlines have been positive, with the UK Tory party well ahead of Labour, pointing to a victory for PM Jonson and a Brexit deal between the UK and the EU. There have also been some promising gestures of a trade deal compromise with the Chinese raising penalties for IP theft as well as there being a landslide victory for the Pro-democracy candidates in Hong Kong.
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Hong Kong democrats score landslide victory in local elections – RTRS
The Hong Kong news should be risk-friendly considering the combination with pro-Sino/US ‘phase-one’ deal headlines at the close of markets last week. President Trump claimed that the stuttering US-China deal is “coming along very well” but he also made clear a reluctance to sign the Hong Kong Human Rights and Democracy Act, which passed Congress with overwhelming support. “Republican senators responded by insisting that the bill would become law, using a Congressional override of a presidential veto if needed,” analysts at Westpac noted. However, the reaction in the gold price would indicate that markets are comfortable with the election outcome and Trump’s reluctance.
US data keeps US dollar bid
As for US data, the final November University of Michigan US consumer sentiment climbed to 96.8 (preliminary 95.7) and expectations rose to 87.3. The US November flash Markit PMIs beat expectations as manufacturing rose to 51.6 (vs est. 51.0, prior 50.6) while services rose to 52.5 (est. 51.4, prior 51.3). Consequently, US 2-year treasury yields rose from 1.59% to 1.63% while the 10-year yields were ranging between 1.75% and 1.78%. The US dollar ended 0.30% higher and markets are pricing only a 5% chance of easing at the December meeting.
Gold levels
Bears are below the 21 4-hour moving average and a 50% mean reversion of the correction of the 12th Nov lows. A break of the 61.8% and 1455 open risk into the 1445 territories that guard the late June highs and a 127.6% extension to 1436.
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