The gold market is moderately lower in early action Monday as stocks remain not far from record highs. Although a bullish outlook for stocks may keep any gains in metals limited, gold and silver are not likely to fall too far. Numerous issues could potentially keep the metals on the offensive, including ongoing U.S./China trade talks, the Trump Impeachment Inquiry and more.
Despite some additional downbeat data out of China over the weekend, stock investors appear optimistic in early trade today. Reports over the weekend have suggested that the U.S./China Phase 1 deal is nearly ready for signatures in what could be the biggest sign yet of a deal getting closer. Although a long-term agreement could take a few-if not several-more months to finalize, the Phase 1 portion would certainly be a step in the right direction. Any type of agreement made between the U.S. and China at this point could score some significant points, and stock markets could even embark on a fresh leg higher. President Trump on Monday has suggested that the ongoing trade talks are ahead of schedule and that part of the deal will be signed ahead of schedule. He did not, however, elaborate further on the potential timing of a deal. Trump has also suggested that he hopes to sign a deal with Chinese Leader Xi Jinping at a summit next month in Chile.
Although the ongoing trade talks remain an important focal point for investors, they are not the only one. Despite a deal being reached, or even the outline of a deal, stocks could potentially have a tough time moving higher following recent strength. Some markets have been moving up on the notion of easier monetary policies, and any letdowns in that arena could set the stage for a significant pullback in equity markets.
The U.S. Fed is set to meet again this week. It is widely expected that the central bank will cut rates again by another 25-basis points at the conclusion of its meeting on Wednesday. Beyond that, however, is a far-more dangerous game and the Fed could even look to stay somewhat hawkish as other global central banks turn increasingly dovish. A hawkish Fed could set up a nice sell-off in stocks and risk assets while providing plenty of ammunition for higher alternative asset prices. Even if the central bank were to signal an end to its current easing this week, rates are still not likely to be going anywhere anytime soon. An extended period of ultra-low rates may keep stocks afloat for longer, but at the same time could also enrich gold and alternative asset classes. A rate cut this week has already been baked into the cake, but markets will likely be far-more concerned with the Fed’s commentary and any plans it may divulge going forward. Of course, the Fed and other central bank plans could also change rapidly as any new developments in the trade war are aired.
For the time being, gold looks to set to continue its sideways price action. Any significant dips in the market are likely to be bought aggressively as markets await further news on the trade war. Despite whatever the Fed does or does not do or even say this week, the outlook for easier monetary policies all over the globe is on the rise and could keep any dollar upside limited. This could, in turn, keep stocks on the offensive while also giving gold and other hard assets a boost. Such movements would not likely turn into a trend, however, as eventually stock investors will want more easing to keep equity markets moving higher. If, or perhaps better, when, the Fed has decided that enough is enough, stocks could potentially start to see increasingly bearish activity as the decade-long uptrend may have finally run its course.