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Gold prices climbed Friday, buoyed by weakness in the dollar and a fall in bond yields, as traders struggled to sort out news that China has agreed to the text of a phase one trade deal with United States.
The U.S. and China have reached an agreement on text of a phase one trade deal and will now move toward signing a deal as quickly as possible, Chinese officials said Friday. The U.S. will scrap tariffs on Chinese goods in phases, Vice Commerce Minister Wang Shouwen said.
President Donald Trump said Friday that the U.S. and China agreed to a phase-one trade deal and said tariffs that were scheduled for Dec. 15 on Chinese goods have been called off.
See also: U.S. and China Reach Phase One Trade Agreement
“It certainly is real progress, but market is cautious of both sides given we have been this close before only to have China pullback from [an] ‘agreed to in principle’ deal,” Jeff Wright, executive vice president of GoldMining Inc., told MarketWatch.
“I believe gold is a little higher rewinding to some of the data earlier in the week,” such as the producer price index and Wednesday’s FOMC policy statement, he said.
Against that backdrop, February gold GCG20, +0.60% rose $3.70, or 0.3%, at $1,476 an ounce, set to more than recover its loss from Thursday. March silver SIH20, +0.36%, meanwhile, shed 1.9 cents, or 0.1%, to $16.93 an ounce, after four consecutive sessions of gains.
For the week, gold is on pace to rise 0.7%, while silver is on pace for a 2% weekly return, according to FactSet data tracking the most-active futures contract.
Market strategists had warned that dissipating geopolitical fears, including on Brexit and U.S.-China trade, remain downbeat factors for the yellow metal over a longer term.
“Gold is a bit anomalous as I had initially pegged gold lower on a tariff rollback trade deal, but with the tame U.S. inflation environment possibly keeping U.S. [yields] in check, gold may not necessarily have the blow-off bottom as a result of the trade deal,” wrote Stephen Innes, chief Asia market strategist at AxiTrader, in a daily note ahead of China’s press conference Friday.
“But in the absence of an absolute dovish Fed, downside risk remains elevated as cross-asset relocation into equities could intensify into the weekend even more so if the global growth rebound trade takes hold,” he wrote.
Meanwhile, U.K. Prime Minister Boris Johnson secured a decisive victory late Thursday that gives him a new five-year term after the Conservative Party won a general election.
Gold prices have been influenced by concerns about trade and uncertainties surrounding a U.K. election, as well as dovish stances by the Federal Reserve and the European Central Bank, which recently expressed support for lower rates for a longer period to support global economies.
The recent geopolitical moves, notably the U.K. election, has pushed one measure of the U.S. dollar firmly lower as the British pound GBPUSD, +1.3674% jumped overnight, but was weaker in Friday dealings. The ICE U.S. Dollar Index DXY, -0.29%, a gauge of the dollar against a basket of a half-dozen currency rivals, was down 0.3% at 97.138. A weaker buck can make commodities pegged to the currency more attractive to buyers using other currencies.
Meanwhile, bonds, which can compete with gold for buyers, were seeing yields retreat amid some doubts about the details of a China-U.S. deal. The 10-year Treasury note TMUBMUSD10Y, -3.49% was at 1.8479%.
U.S. stocks on Friday provided little guidance for haven gold, with benchmark stock indexes seeing mixed trading after the news of progress on a trade deal.
Among other metals on Comex, March copper HGH20, -0.66% fell 0.5% to $2.7815 a pound, looking at a weekly rise of 2%. January platinum PLF20, -1.56% shed 1.3% to $932.40 an ounce, trading around 3.7% higher for the week.
Palladium was poised to reach another record settlement Friday, with the March contract PAH20, -0.86% up 0.6% at $1,925.20 an ounce.
Read: Palladium’s up 60% year to date, as prices top $1,900 to new record
