By Barani Krishnan
Investing.com - The on-again, off-again U.S.-China trade negotiations are on again, delivering a fresh knock to gold market sentiment Friday.
U.S. gold futures for December delivery settled down $7.90, or 0.5%, at $1,499.50 per ounce on the Comex division of the New York Mercantile Exchange, returning below the key $1,500 level on perceived progress in Sino-U.S. trade relations.
Spot gold, reflective of trades in bullion, also remained below $1,500. At 2:33 PM ET (18:33 GMT), bullion was trading down $10.15, or 0.7%, at $1,488.90.
For the week, bullion was down about 1.2% for its worst week since late March. Gold futures settled down 1.1% for their third-straight weekly drop and the biggest weekly decline since April.
Global economic worries have taken a back seat this week after trade concessions from both the United States and China and President Donald Trump's latest comments that he was potentially open to an interim trade deal with China.
"It doesn't mean we will have a trade deal, but maybe a possibility that the U.S. and China might postpone the new tariffs and possibly even relax some of the tariffs that are already in place," Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters. "It's a market of hope. A hope of a cosmetic resolution."
Just a day ago, gold appeared to be on a new breakout higher after the European Central Bank cut its deposit rate to a record low of -0.5%, while promising that rates would stay low for longer. It also said it would restart bond purchases at a rate of 20 billion euros a month from Nov. 1.
The eurozone action pressures the Federal Reserve, which holds its next policy meeting on Sept. 17-18, to respond with dovish measures of its own.
But the notion of improving U.S.-Sino trade relations, along with stronger-than-expected U.S. retail sales and consumer sentiment data for August, stopped gold from breaking new ground Friday. The better economic data particularly dents hopes for a 50-basis-point cut in rates next week. According to Investing.com’s Fed Rate Monitor Tool, the market still sees an 87.7% chance of a quarter-point cut by the U.S. central bank.
“Signaling of additional cuts this year will be the main driver” for gold, TD Securities said in a note on precious metals shared with Investing.com.
“A failure to leave the door open for further easing, and the dot plot not showing increasing calls for 75 bps of cuts this year could be taken as a disappointment for the yellow metal,” the Canadian bank and broker group said.
But while there could be disappointment in the near term, any dips should be shallow, TD Securities added.
“Underlying economic weakness, dovish central bank tilt, and shortage of safe-haven assets still suggests the path of least resistance for gold and friends is higher.”