The end of this week could prove a pivotal moment for gold according to some analysts as US President Donald Trump and Chinese president Xi Ping square off at the G20 summit in Argentina.
One of the main focuses of the summit is whether the presidents can come to an agreement over trade practices between the 2 countries which has been the source of much friction ever since Trump introduced trade tariffs against China who immediately retaliated with some of their own
If a deal on trade is not made, the case for moving interest rates higher in the US may lose momentum and pave the way for gold to sustain a serious rally.
"If Trump and Xi can't come to an agreement at the G20 meeting, I think you will see a pause in the U.S. Federal Reserve's rate increases next year, which in turn will help gold prices go higher," said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
Some say besides the trade talks, other factors will come into play which should support gold such as the tax cuts that were introduced earlier on in Trump’s agenda which are now coming back to bite by causing huge deficits which will hit the US dollar.
A lower dollar usually means good news for gold.
“The tax cuts were short-term stimulus measures, but now we are starting to see the budget deficits widening quite a bit,” he said. “We expect that deficits will be in great focus next year, which will weigh on the U.S. dollar,” said Bernard Dahdah, precious metals analyst at Natixis.
Mr Dahdah also believes that the Fed rate hiking cycle has nearly run its course and well finish sooner rather than later.
“Although the Federal Reserve will raise rates next year, we will reach the end of the cycle,” he added.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this broker. Before deciding to trade foreign exchange you should consider whether you understand how CFDs work, your investment objectives, your level of experience and readiness of taking risk. The possibility exists that you could sustain a loss of some or of all of your initial investments and therefore you should not risk more than you are prepared to lose. Please seek independent financial advice if necessary.
|By clicking "Continue" you will be redirected to the website operated by FIBO Group, LTD company registered in BVI and regulated by FSC. Please familiarize yourself with the Customer Agreement through the link. Click "Cancel" to remain on this page.|