Date: 09 May 2019

Financial markets continue to come under downside pressure following worrying reports that Chinese officials have now backtracked on all recent trade deal commitments informally agreed with U.S negotiators. Sources close to Sino-U.S trade negotiations suggest that Beijing officials reversed recent promises to reduce theft of intellectual property, trade secrets, currency manipulation, and forced technology transfers.

To make matters worse for the investors, China is now said to be preparing its own retaliatory trade tariffs on United States imports coming into China if the Trump administration go ahead and impose an additional $25 billion of fresh trade tariffs on Chinese made goods entering into the United States this coming Friday.

Mixed economic data coming from the Chinese economy also helped to elevate risk-off trading sentiment, as Chinese export data came in weaker than most economists had been predicting last month. Chinese exports declined 2.7 percent in April, dashing hopes that a much anticipated economic recovery had started, following the 14.2 percent increase in Chinese exports during the month of March.

Chinese import data improved for the first time in four months, with a robust 10.3 percent increase, far outpacing expectation of a three percent decline. The improving import data points to rising internal demand as credit conditions inside the Chinese economy continue to improve after recent stimulus measures from the PBOC. CPI inflation data has also improved inside China, although analysts attributed the rise in inflation to a shortage of agriculture products in China.

If Beijing is unwilling to commit to any binding agreement to the most crucial issues surrounding the Sino-U.S trade deal, it is very likely that President Trump will carry out his promise to impose even greater tariffs on Chinese imports tomorrow. As the deadline approaches, it is leading to even greater panic amongst traders and investors as they scramble to exit stocks and enter into safe-haven asset classes.

 

GOLD Daily Mountain Chart | Source ActivTrader

GOLD Daily Mountain Chart | Source ActivTrader

 

Gold has failed to come to life this week, despite the recent decline in equity markets and the yellow-metal traditionally being the preserve of safe-haven investors during times of uncertainty. The daily chart continues to show a valid head and shoulders pattern, with price trading close to the neckline of the bearish price pattern. Buyers need to move price above the $1,307 level to spark a fresh wave of technical buying, while critical technical support is located close to the $1,280 level.

 

Written by Nathan Batchelor, External Analyst, ActivTrades

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