Gold holds firm after US and China sign trade deal

Bengaluru — Gold prices held steady on Thursday after the US and China signed a preliminary trade deal, as investors worried that a number of sore issues remained unresolved between the world’s two top economies.

Among other precious metals, palladium scaled a record high, while platinum jumped to its highest in nearly two years.

Spot gold was little changed at $1,555.74 per ounce by 5.25am SA time. US gold futures rose 0.2% to $1,556.20.

The much-awaited Phase 1 trade deal was signed by US President Donald Trump and Chinese Vice-Premier Liu He on Wednesday, defusing an 18-month-long row that has roiled global markets.

“Some people are disappointed because Trump didn’t gain much from the deal, compared to the huge uncertainty that he imposed on the US economy, farmers and workers,” said Margaret Yang Yan, a market analyst at CMC Markets.

“The critical structural issues such as China’s industrial subsidies and intellectual thefts are not even fully addressed yet.”

Analysts said the deal failed to address structural economic issues that led to the conflict, did not fully eliminate the tariffs that have slowed the global economy, and set hard-to-achieve purchase targets.

Bullion, considered a safe asset in times of political and economic uncertainty, gained 18% last year due to the tariff war and its effect on the global economy.

Weighing on gold prices, world stocks scaled record levels on Thursday as investors cheered the trade deal.

“No question the detente is favourable for risk, but the agreement won’t change the Federal Reserve’s outlook and if anything, it could lead chair Powell to cut rates as the economic impulse from the Phase 1 deal could be meek,” Stephen Innes, a market strategist at AxiTrader, said in a note.

On Wednesday, the Fed expressed confidence that borrowing costs are at the right level to sustain growth and lift inflation to healthier levels.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Reflecting investor sentiment, holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust rose 0.43% to 878.32 tons on Wednesday.

Palladium was up 0.8% at $2,281.55 an ounce after hitting a record peak of $2,284.00 earlier in the session.

Platinum was down 0.2% to $1,018.09 after hitting its highest since January 2018 at $1,027.44 earlier, while silver edged down 0.3% to $17.93 per ounce.

Reuters