Gold Prices Drop as World Stocks Rally Ahead of Trade Deal Signing

NEW YORK, N.Y. – Financial markets remained hopeful today as relations between the US and China remain amiable. The improved goodwill has seen stocks in Asia and Wall Street rising. Meanwhile, gold prices stumble as investors gain more confidence in the market.

News that the Treasury Department of the US will be removing the “currency manipulator” designation from China has made traders more hopeful that the two superpowers will finally find an acceptable middle ground on trade.

The olive branch extended by the US has caused worldwide equity bulls to feel confident, resulting in a strong rally in Asian shares. The positive feeling has also imbued Wall Street, with the top US benchmarks hitting record highs again.

Stock markets in Asia ended Tuesday on a positive note, although indices in China and Hong Kong slipped.

Japan’s Nikkei 225 surged to a 0.73% gain after taking a break on Monday and closed the day at 24,025.17. The Topix ended 0.31% higher at 1,740.53. Australia’s S&P/ASX 200 rose 0.85% or 58.50 points to 6,962.20. The All Ordinaries index climbed 0.82% or 57.80 points to 7,078.

The upbeat trade numbers weren’t enough to generate a more positive reaction in Chinese shares. The Shanghai Composite Index fell 0.28% or 8.75 points to 3,106.82. The country’s exports went up a yearly 7.6% in the month.

According to China’s official records, it was the first time its exports showed gains since July of last year. It was also its fastest growth numbers since March 2019. Imports in the month also went up 16.3% from the previous year.

The signing of first phase of the trade deal on Wednesday is bolstering risk sentiment. And while hopeful, investors remain cautious due to the lack of details in the imminent trade agreement. Disappointments and unmet expectations can quickly turn the market sour and leave traders empty-handed.

The optimism of the trade deal has a contrary effect on gold prices though. The yellow metal plummeted to its lowest level in almost two weeks as the demand for this safe-haven asset appears to be have been sated.

Gold is currently trading at about $1,539 and could lose more when the Phase One Trade Deal is formally signed. However, analysts are saying this could just be a short-term decline. Gold prices could go up again if the trade deal turns out to be disappointing.

Investors will keep a close watch on how the prices react at the $1,555 level though. A daily close lower than that point could cause a drop to $1,535. But movement upwards of $1,555 can herald a $1,570 pricing.