Sino-U.S. talks feeding investor optimism
All eyes on the U.S. on Friday as Trump meets with Chinese Vice Premier Liu He following another week of talks between the world’s largest economies. It would appear that there’s been some real progress made in the talks, at least enough to extend the truce and avoid further tariff hikes.
This is a major risk for markets and is helping to feed into the improved risk appetite we’ve seen this year. If Trump’s team can get this over the line before next week’s deadline, it could provide a significant boost although European investors may get a little anxious at the prospect of the U.S. President then turning his attention that way.
Gold pares gains but remains bullish
Gold has come under pressure in recent days but this looks like nothing more than a little profit taking on a stronger dollar at this stage. The yellow metal has looked bullish for some time and the break above $1,300 just confirmed that. Since then, it’s gone from strength the strength and I see no reason to believe that’s over.
Gold Daily Chart
The environment right now may not be perfect for gold – the resurgent dollar is clearly a drag – but it is bullish. Central Banks around the world are gradually coming to terms with the fact that the global economy is slowing and is in need of a little support. The decision to put tightening on hold and maybe even loosen a little is both appropriate and supportive for gold prices for now.
Oil stalls after breakout
This fact may not be quite so bullish for oil. Slower global growth, a resurgent dollar and record U.S. production are all weighing on prices and causing any rallies to stall relatively quickly. It has recovered from its sell-off late last year, but not as much as you may have expected, and there does seem to be a reluctance to hop on board.
Oil (WTI and Brent) Daily Chart
WTI broke through a strong resistance zone this week and rather than being the catalyst for another tear higher, it’s just stalled again. That doesn’t fill me with confidence near-term.
That may change in the coming weeks but we’ll need to see evidence that OPEC still has the sway it once did. It’s safe to say, Saudi Arabia has gone well above and beyond and the market shrugged. If U.S. output starts to fall in line with oil rigs then that may change, but for now, it’s only going higher, 12 million and counting.