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Fundamental analysis

Gold analysis: price hits two weeks high after US-China trade deal resurgence

Sanmi Adeagbo | Feb. 18, 2019
Gold analysis: price hits two weeks high after US-China trade deal resurgence

Gold price rallied to its highest in two weeks on Monday. This was as a result of a weakened dollar caused by hopes that the US-China trade deal is nearing completion.

February 18, 2019 | AtoZ Markets - Gold burst upside on Friday as efforts to break below the 1300 handle yielded no positive results. Gold instead rose to its highest price in two weeks as the rally continues on Monday. There are hopes that the US-China trade war would cease and the two giants would agree on mutual trade deals. The Dollar-denominated commodity thereby rose after the Dollar weakened. In the London session, spot Gold has gained 0.3% to trade at $1,324 per ounce close to a 9-month high of $1,326 marked on 31st January 2019. The commodity, which was barely trading at $1,280 at the beginning of the year has gained nearly 3.5% in less than 8 weeks. Meanwhile, U.S Gold futures also gained 0.4% to $1,327 an ounce since last week.

Gold price and the trade war

ANZ analyst Daniel Hynes said that the progress in the deal talks might have reduced demands for Dollar suggesting that ''alleviation of risks around the trade talks has certainly benefited the market''. The Dollar has started the week weaker across the board as investors are shifting away from the Dollar which has been their safe-haven during the trade war. The trade talks between the wold's two largest economies will resume this week in Washington. Late last year, there was a 'cease fire' truce between them until 1st March when fresh deals will be finalized. However, U.S president, Trump reiterated on Friday, that he may extend the deadline of the truce and keep tariffs on Chinese products from rising.

Fed reserve 2019 rate decision

The outcome of the last Fed's meeting is due to be released on Wednesday. The Fed has kept rates unchanged so far this year but the coming meeting would provide more clues on the likelihood of rate hike this year. A rather rates hawkish tone might drive Gold prices downside. With the current move, it seems Gold will retest $1,326 resistance price level. According to Nicholas Frappel, global general manager of ABC Bullion:

Loose monetary policies are generally favorable to Gold, which has benefited since the Fed paused its tightening path. The market will be looking closely at US and China data and I think Gold will target a retest of the $1326 level again

Gold technical analysis and important price levels

After failing three times to hit 1300, the bearish momentum dropped and the bulls took over with a break above 1315-1318 resistance zone. Price will most likely hit 1326 and even break above it up to 1360 as the bullish impulse wave from 1160 continues. Only a dip below 1300 would hamper this bullish development. All eyes on Wednesday's FED meeting.

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