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Gold prices take U.S.-China ‘phase one’ deal in stride

Kitco News

(Kitco News) - The gold market is taking news of a phase one trade deal between China and the U.S. in stride as the precious metal prices trade relatively unchanged on the day.

Details are still light but, according to several news sources, the White House is expected to make an official announcement on the trade deal later on Thursday.

“The written agreement is still being formulated, but they have reached an agreement in principle," one source told Reuters.

The gold market has seen little reaction to the latest news; February gold futures last traded at $1,474.10 an ounce, nearly unchanged on the day. The major technical damage came earlier in the day when gold prices, seeing a 1% gain for the session, quickly reversed course and fell sharply into negative territory.

The market was reacting to a positive tweet from President Donald Trump, who announced that they were close to a deal with China.

Trade uncertainty has been a significant driver of gold for most of 2019 as market volatility has picked up as investor sentiment as ebbed and flows in reaction to trade headlines.

Although trade tensions have eased recently, analysts are not expecting the issue to disappear in the new year. Although no details of the phase one agreement have been released, some analysts say that China’s agricultural purchases are expected to rise to 2018 levels.

“Basically this phase one deal will bring trade negations back to neutral territory,” said George Milling-Stanely, chief gold strategist at State Street Global Advisors. “The real issues are fall from resolved and that will continue to add uncertainty to financial markets and that will be good for gold.

“Trade tensions have eased but they are far from gone,” he added.

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