Gold climbing on Chinese pessimism this morning, after an overnight dip that was driven by renewed optimism.

The reversal is reported this morning by CNBC.com. A government source told the news outlet that the mood in Beijing about a trade deal is pessimistic because President Donald Trump is now expressing reluctance to roll back tariffs, which China had believed the two countries had agreed to.

The two sides had “constructive discussions” about “each other’s core concerns” on Saturday, according to a CNBC report that cited China’s Ministry of Commerce. The call between Chinese Vice Premier Liu He and Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer was on the phase-one accord and came at the request of the U.S. side.

December gold futures rose 0.4% last week to settle at $1,468.50 an ounce on Comex. Bullion is down 3.1% so far this month and decreased 0.3% on Friday. After an overnight dip below $1,460, the December contract is back to $1,468.40.

The weekend call came on the heels of comments late Thursday from White House Economic Adviser Larry Kudlow, who said that the trade talks were near the final stages. Gold skyrocketed earlier this year as a safe haven against uncertainty over the standoff between the two superpowers. It tends to decline on positive news about a potential trade accord.

Gold is projected to average $1,511 an ounce next year and trade in a range around $1,500, according to a global outlook issued by Morgan Stanley on Sunday. It forecast that the U.S. equities and corporate bonds would underperform peers in 2020, while the dollar weakens amid growth outside the U.S., Bloomberg reported. Investors often view gold as a hedge bet when other markets are weak or in times of geopolitical turmoil.

Investors continue to keep a close eye on economic news for indications on whether the Federal Reserve will cut interest rates for a fourth consecutive time in December. The CME FedWatch Tool showed a 3.7% probability of a hike at the Federal Open Market Committee’s next meeting Dec. 11, while 96.3% predicted no change early Monday.

Upcoming releases include U.S. foreign holdings of Treasuries on Monday, housing starts Tuesday and existing home sales Thursday. China is set to announce its loan prime rates on Wednesday.

Meanwhile, China’s central bank unexpectedly trimmed a closely watched lending rate — the seven-day reverse repurchase rate — for the first time in more than four years on Monday, Reuters reported.

Silver increased 0.5% last week, outpacing gold’s rally. The most-active December contract settled at $16.95 an ounce on Comex. It’s down 6.2% in November and declined 0.5% on Friday. Spot platinum increased last week and spot palladium declined. Both are down for the month to date.

 

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