Date: 30 Apr 2019

Trade talks between the United States and China are now approaching a critical stage according to the United States Treasury Secretary Steve Mnuchin. Secretary Mnuchin said on Monday that trade talks were now ‘getting into the final laps’, ahead of the tenth round of trade talks in Beijing, which are scheduled to resume today.

Speculation surrounding a trade deal being announced before June has remained extremely high, although the rhetoric from Washington and Beijing remains one of cautious optimism. Secretary Mnuchin said that an agreement could happen anytime or U.S negotiators could still walk away without any deal at all.

United States Trade Representative Robert Lighthizer is set to join U.S Treasury Security Mnuchin in Beijing today, with Chinese Vice Premier Liu entering into talks with U.S officials next week. Many analysts speculate that next week’s meeting could be the final chance for officials on both sides to iron out the differences between the world’s two largest economies.

While an enforcement mechanism has been agreed, significant issues still remain unresolved, as officials from both sides are set to enter into wide-reaching discussions over non-tariff barriers, agriculture, service, and purchases. Two areas of contention have been forced technology transfer and intellectual property theft, with U.S President Trump remaining particularly vocal about intellectual property theft.

The worst-case scenario for final markets would be if both sides failed to find an agreement and President Trump decided to impose even greater tariffs on Chinese goods coming into the United States. Stock markets would almost certainly fall on bearish news coming from the trade discussions, which could prompt demand for gold and other safe-haven assets.

 

Gold Daily Mountain Chart | Source: ActivTrader

Gold Daily Mountain Chart | Source: ActivTrader

 

Gold has had a tumultuous month, with the yellow metal eroding all of its strong gains since the start of the year. The daily time frame chart is currently showing a bearish head and shoulders pattern, which could be another ominous sign for gold over the medium-term. Bulls now need to move price above the $1,311 resistance level in order to shift the short-term sentiment towards gold.

 

Written by Nathan Batchelor, External Analyst

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