Gold Prices Edge Higher, G20 Trade Concerns Underpin Sentiment

The dollar has been unable to general any significant traction and gold also gained support from persistent concerns surrounding the US trade stance with prices advancing to two-week highs.

Gold prices edged higher in US trading on Friday with the dollar decline following a dip in the University of Michigan consumer confidence inflation expectations index the main catalyst for US losses. With US yields also lower, gold pushed to highs near $1,232 per ounce, although overall ranges were narrow.

The latest COT data recorded a significant decline in long, non-commercial gold positions for the second successive week with a drop to 106,038 contracts from 133,685 the previous week and this was the lowest net long position since early January.

The overall dip in long positioning will reduce the risk of position liquidation and should provide further short-term support to prices with the possibility that positions will be rebuilt.

In contrast, there was a decline in SPDR Gold Trust holdings on Friday which still suggests investor caution.

There was relief that the G20 communique maintained its call for competitive devaluations and FX market instability to be avoided. This commitment eased the immediate threat of any escalation in currency wars.

There were still important concerns surrounding trade with statement calling for protectionism to be resisted not included in the statement. The US insisted on its removal as part of their strong focus on reducing trade imbalances and there was significant friction with Germany. Trade concerns had a significant impact in curbing risk appetite, although equity markets were still confined to relatively narrow ranges on Monday.

The dollar was unable to make any significant headway on Monday, trapped close to six-week lows on a trade-weighted basis. US yields also declined which provided net support to gold prices which traded above the $1,230 level and touched the highest level for two weeks, although ranges were still relatively narrow in subdued conditions.

Dollar trends and developments surrounding risk appetite will continue to be watched closely in the short term with the French Presidential election TV debate also monitored later on Monday.

Gold Prices 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.