Gold futures are trading slightly better on Friday with prices consolidating slightly above yesterday’s low, but well off the high for the week reached on Wednesday. Despite the steep sell-off on Thursday, gold remains higher for the week. The market is being underpinned by concerns over Syria and a U.S.-China trade dispute.
At 0824 GMT, June Comex Gold futures are trading $1342.80, up $0.90 or +0.07%.
On Thursday, gold posted its biggest one-day percentage fall since March 28, just a day after the save-haven metal climbed to its highest level in 11-weeks.
The steep drop in prices on Thursday could have been a reaction to Wednesday’s hawkish U.S. Federal Reserve minutes which showed the central bank was confident that economic growth would continue and inflation would eventually hit its 2.0% target.
The minutes further supported the idea of at least two more interest rate hikes this year. Shortly after the release of the minutes, traders began to increase bets on June and September rate hikes. The dollar also recovered after the release of the minutes, making gold a less-desirable asset.
That’s the bearish side of the market.
On the bullish side, investors are betting on an escalation of tensions in Syria. President Trump and his national security aides on Thursday discussed U.S. options on Syria, where he has threatened missile strikes in response to a suspected poison gas attack, as a Russian envoy voiced fears of wider conflict between Washington and Moscow.
Furthermore, British Prime Minister Theresa May summoned her senior ministers to a special cabinet meeting on Thursday to discuss joining the United States and France in possible military action against Syria after a suspected poison gas attack on civilians.
Another potentially bullish factor is a possible trade war between the U.S. and China. The World Trade Organization said in its annual report released on Thursday that world trade in goods is maintaining a robust recovery, but it still might falter if trade tensions escalate further.
Additionally, China’s commerce ministry said on Thursday trade negotiations with the United States would be impossible as Washington’s attempts at dialogue were not sincere, and vowed to retaliate if U.S. President Trump escalates current tensions.
Ultimately, it all comes down to investor demand for risk. This week, stocks have posted solid gains due to increased demand for risk. This could also be keeping a lid on gold prices. Demand for gold could pick up later in the session if the dollar weakens along with stock prices.
This article was originally posted on FX Empire
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