Information that showed up on the market about the imminent end of the US-China trade war keeps the XAU/USD bulls in a depressed state. Low interest rates of central banks and world debt markets, along with the end of the conflict between Washington and Beijing, can push stock indices up. Improving global risk appetite is not good news for gold, so Donald Trump's statement that the parties are in the final stages of suffering before the birth of an important agreement has cooled the hot heads of precious metal buyers who want to launch a counterattack.
Despite a warning from Reuters that the deal in 2019 will most likely not be concluded, the United States and China are moving towards one. China is easy to understand: its economy has been slowing for seven consecutive months and has shown the worst growth rates over the past three decades. It would seem that fears for its fate and the acceleration of consumer prices should have stimulated the local population's demand for gold. In fact, this does not happen: China's imports of precious metals have fallen to its lowest level since January 2017, and Metals Focus predicts that Chinese interest in jewelry will decrease this year by 4%, investment demand - by 20%.
Dynamics of Chinese gold imports
The fact that Beijing is burning with a desire to conclude a deal is evidenced by one of the largest ever issuance of government bonds denominated in US dollars. We are talking about $6 billion. At the same time, demand reached $20 billion. In fact, China does not need the US currency, as it holds US Treasury bonds worth $1.1 trillion. But accumulating dollars for the purpose of selling them in order to put a barrier on the path of the bulls in USD/CNY is a good idea. Let me remind you that the currency pact to prevent the devaluation of the renminbi can be part of the deal between the US and China.
Dynamics of issue of dollar bonds by Chinese issuers
Gold feels at ease despite being deprived of support from Asian demand and as it is under pressure from a high global risk appetite and a strong greenback. The Federal Reserve also creates pressure on precious metals, which intends to keep the federal funds rate at 1.75% for a long time. Judging by the speech of the FOMC Governor Lael Brainard, three acts of monetary expansion in 2019 put monetary policy in the place where it should be. Furthermore, it is necessary to observe the incoming data. In this regard, the reduction of the negative balance of trade in goods in October and the positive from consumer confidence from the University of Michigan in November support the dollar and keep the bulls at XAU/USD in the pen.
Technically, updating the November low will increase the risks of pulling down gold quotes to $1435-1440 per ounce, where important levels of Pivot are located. On the contrary, a break of resistance at $1475 will allow us to talk about the formation of the Double Bottom reversal pattern, which will be good news for the bulls.
