Gold headed for its biggest monthly drop in three years on signs the US and China are edging closer to a phase-one trade deal, easing demand for haven assets.
President Donald Trump declared Tuesday that talks on the first phase of a trade agreement were nearly done after negotiators from both sides spoke by phone. Still, clouding the outlook was possible fallout from Trump signing legislation expressing US support for Hong Kong protesters. While that prompted China to threaten retaliation, Beijing stopped short of any immediate action and didn’t offer any details.
The precious metal is down 3.6% this month, the most since November 2016, when Trump won the US presidential election.
Non-interest bearing bullion also took a hit when the Federal Reserve signaled a pause in monetary easing after cutting rates three times this year, and Chairman Jerome Powell struck an upbeat tone in gauging the ability of policy makers to extend the record US economic expansion.
“Optimism around the trade negotiations and global growth outlook continues to weigh on gold,” Michael McCarthy, chief market strategist at CMC Markets, said in an email. “Less monetary accommodation and a stronger US dollar are just two reasons why investors are deserting the yellow metal.”
A phase one deal signing could see gold test support around $1,425, whereas a delay or deferral sparked by the US Hong Kong bill could see the metal test resistance at $1,480, McCarthy said.
Spot gold rose 0.1% on Friday to $1,458.33 an ounce, and was still set for an annual gain. Australia’s top producer Newcrest Mining Ltd. is heading for a third straight month of losses.
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Other precious metals also declined in November, with silver losing 6.2% and platinum down 3.9%. Palladium was the exception, heading for a fourth monthly advance, after hitting a record $1,847.07 an ounce on Friday, on expectations its eight-year supply deficit will widen next year.