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Any tariff delay could mean trade deal delay; supports gold - analysts

Kitco News

(Kitco News) - Any delay in the implementation of tariffs in the U.S.-China trade war is likely supportive for gold since it means a broader trade deal between the two countries may still be some ways down the road, analysts said Tuesday.

The Wall Street Journal reported that U.S. and Chinese negotiators are “laying the groundwork” to delay new tariffs that were supposed to go into effect on Dec. 15. The report said the countries are still trying to decide how to get China to commit to “massive purchases” of U.S. farm products.

As of 10:19 a.m. EDT, Comex February gold was $4.30 higher to $1,469.20 an ounce.

Gold prices initially slipped on the news, said Bob Haberkorn, senior commodities broker with RJO Futures. However, they have since recovered and are higher on the day.

Neither side wants the tariffs to kick in, he said.

“Gold is interpreting this as there is no deal close, except pushing back the tariffs further,” Haberkorn said. “There is more uncertainty. It should help gold.”

Negotiators had hoped to reach a trade deal by the Dec. 15 deadline, Haberkorn continued.

“It doesn’t appear that is the case. That’s why they pushed the tariffs back again.”

Charlie Nedoss, senior market strategist with LaSalle Futures Group, said any actual meaningful trade agreement would probably be negative for gold since it would remove the fear trade. He likewise said news of a possible delay on tariffs perhaps means a delay on any trade deal.

He pointed out that equities are roughly flat, waiting to see if there is any more concrete news beyond a delay of the Dec. 15 tariffs.

“They [the U.S. and China] are trying to get close to a resolution as they make baby steps,” Nedoss said. “Maybe this is one of them; maybe it’s not. I don’t think the market is embracing it as something concrete, just looking at the price action.”

George Gero, managing director with RBC Wealth Management, also described any delay in the tariffs as a positive factor for gold, but added that there are other factors underpinning the market as well, including the continuing impeachment saga in the U.S. and increased gold-jewelry buying. Further, he described it as positive that gold has been able to avoid further losses in the wake of Friday’s stronger-than-forecast report on U.S. nonfarm payrolls, which rose 266,000 in November.

In fact, he cited a minor decline in daily figures for the number of open positions, meaning limited long liquidation. Still, the rally is limited so far.

“One reason it’s not a huge rally is because we are still waiting for the Fed notes tomorrow afternoon, which if hawkish could be a negative for gold,” Gero said. He was referring to a statement following a two-day meeting of the Federal Open Market Committee.

Nedoss pointed out that February gold is near a key technical area – the 10-day moving average of $1,470.59 and the 20-day of $1,471.88. If gold can rally above here, the market may gain some technical momentum, he said.

“I see the bigger resistance for gold up at $1,490 and then $1,500,” Nedoss said.

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