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#1 02-12-2019 11:20:50

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XAU/USD: Will gold rise again in December after a harsh November?

XAU/USD: Will gold rise again in December after a harsh November? What factors are at stake?

Gold rose last Friday, with US/China amidst trade relations that are off to a bad start, but gold bullion still ended up with its worst month since September, as positive data on the American economy dampened interest in safe haven assets.

Gold for the February 2020 delivery, the most active contract, gained $7.39, or 0.6% to $1,460.7 per ounce this last Friday. Precious metal ended the month with a loss of $54.01 per design, down 3.4%.

Gold traded in the $1,450-$1,484 range for most of last month, after investors overcame fears of an impending recession in the United States and key stock market indices set new records for optimism in terms of prospects for a trade agreement between Washington and Beijing.

Investors are concerned about the deterioration in US/China trade relations after a bill in favour of Hong Kong demonstrators was signed by Donald Trump last week.

"As the year draws to a close, the main things to watch out for are interest rate developments, the resolution of trade tensions and, finally, the evolution of the gold price against the dollar," says Kathrine Kaminski of the AlphaSimplex Group.

"These three forces are all at play, if one of them becomes dominant, we could clearly see the price of gold move strongly in both directions."

Trade concerns resumed even more strongly last week after President Trump signed a law supporting Hong Kong demonstrators, a point of contention between the US and the Chinese. In response, China's authorities summoned the US ambassador and described the new law as an interference in its internal affairs.

Investors fear that this could jeopardise the chances of concluding an agreement between the two countries before the 15 December deadline for a new round of tariffs on Chinese products.

Return of the rise in Gold in December?

After a weak November, the question now is whether Gold will rebound this month.

And as suggested above, the answer will depend almost exclusively on the evolution of the US-China discussions. A breakdown in negotiations, or even a simple postponement of the Phase 1 agreement into 2020 without announcing a date, could lead traders to rush back to safe haven values, which could push Gold higher once again.

On the other hand, it is unlikely that Gold will achieve this key psychological objective if a Chinese/American agreement is signed in the coming weeks, even if it turns out to be mostly symbolic in terms of its value.

XAU/USD hourly chart

"Anything worth having is worth going for - all the way." - J.R. Ewing



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