Gold prices dimmed further today off the back of improved U.S. trade and economic sentiment. However, according to analysts, given the amount of volatility in today’s world it will stay at a high level over the longer term.
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Deal Driver
Spot gold was down 0.6% at $3,347.28 per ounce in early trading, with U.S. gold futures off 0.7% at $3,349.80.
Hopes that a trade deal between the U.S. and the EU, to avoid the implementation of crushingly high 30% tariffs on imports from August 1, was getting closer was one of the main drivers. It has been reported that the deal under discussion is for a baseline 15% U.S. tariff on EU goods.
This would follow the signing earlier this week of a deal between the U.S. and Japan where imports will also be taxed at 15%, below a threatened 25% rate. Trade talks with China are also pencilled in next week.
All of these trade deals lower the threat of high tariffs being imposed on countries around the world, with the subsequent threat to economic growth.
This uncertainty, as seen below, has largely led to a huge spike in demand for gold and the gold price over recent months.
Uncertainty Remains
That’s because gold is seen as a safe haven in times of economic and geopolitical stress and strife.
“Basically we are seeing some profit-taking from short-term bullish speculators due to the fact that we now start to see this trade-deal optimism in the market,” OANDA senior market analyst Kelvin Wong said.
Lower-than-expected U.S. jobless claims making it less likely that the Federal Reserve will cut rates are pressuring gold, according to Ricardo Evangelista, senior analyst at brokerage firm ActivTrades.
However, he added: “There is an element of uncertainty that still lingers with a strong support around $3,300, I see the potential for gold prices to rise should new episodes of volatility be triggered.”
Indeed, worries over geopolitical events in the Middle East, Asia and Europe also remain and could be a further driver for the gold price in the months ahead.
It is why analysts still feel bullish about the gold price, as can be seen by the consensus below.
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