Analytical Charts - Jim Wyckoff
U.S And The E.U. Avert Trade War, However China Dispute Intensifies
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At least for today, it seems the pendulum is swinging into bullish territory in regards to gold pricing. Recent declines in gold pricing have been based on two primary factors. First, dollar strength has weighed heavily on gold pricing. Secondly, traders have added selling pressure to the equation.
This is the opposite of what traders witnessed today as a combination of dollar weakness and buying pressure have taken gold prices higher. As of 5:00 PM Eastern standard time, gold futures are currently trading $6.30 higher, a net increase of just over half of a percent and fixed at $1,231.80.
The U.S. dollar index is currently trading down 43 points and fixed at 93.95. Spot gold is presently fixed at $1,231.40, resulting from a $7.30 net gain on the day. On closer inspection, we can see that the vast majority of today’s price increase is directly attributable to a falling dollar, which is adding $5.50 to the value of each ounce of gold. The remaining $1.80 gain is attributed to normal trading.
Today President Trump met with Jean-Claude Juncker, the E.U. commission President in Washington, in order to avoid further escalation of a trade war between the United States and the European Union.
According to the Guardian, the United States and E.U. reached a deal in which the European Union has agreed to lower industrial tariffs as well as import more U.S. soybeans. Although their optimistic outcome continues to fuel and favor U.S. equities, the U.S. dollar has continued to weaken, and the short-term gains witnessed in gold remained well after the announcement was made.
All Is Not Quiet on The Chinese Front
At the same time, Chinese president Xi, speaking at the annual summit of BRICS economies in Johannesburg, warned that countries who pursue “economic hegemony” will end up hurting themselves. The Chinese President declared that leaders must choose between cooperation and confrontation.
“Unilateralism and protectionism are mounting, dealing a severe blow to multilateralism and the multilateral trading regime.”
These statements could well be the Chinese president’s retaliatory comments to a tweet President Trump sent today which said “China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S. They are being vicious in what will be their failed attempt. We were being nice - until now! China made $517 Billion on us last year.”
The combination of favorable talks between the United States and the E.U., as well as the continued confrontation between the United States and China are having a push poll effect which has kept gold prices firm at least for today.
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Wishing you as always, good trading,