Gold’s rise has been one of the main stories in financial markets for Q2 2019. As the month of June, as well as the first half of 2019, comes to an end, the yellow metal has had an interesting history.
Surging in the first couple of months alongside other precious metals such as palladium that were caught in a bubble, gold struggled to surpass it’s earlier high until recently, where prices broke resistance levels and surged into the $1,400 per ounce territory.
Setting a 5-year record in the process, Gold prices ended up falling below that level as markets open after the G20 summit.
Early Monday markets saw gold tumble as Asian markets began trading. The main reason for this fall was on the news that U.S.-China trade talks, which have long been put off after both nations raised tariffs on each other’s exports, are now planned to resume again as both parties come to the table.
Additionally, a surprise meeting between U.S. President Donald Trump and North Korea’s Kim Jong Un has set a precedent, easing some of the tensions surrounding this area of the world as Trump became the first President in history to visit the country.
Spot gold prices saw a drop of around 1.3 percent as markets opened in Asia early Morning. Prices dipped to $1,392.60. Most traders will be watching headlines that emerge from the G20 meeting this weekend to see whether there will be any new fuel to add to the fire that has been rising gold prices.
“We are somewhat concerned about the speed with which the market has re-assessed the likelihood of rate cuts by the U.S. central bank. Any delays in delivering easier monetary conditions, potentially exacerbated by a constructive G20 summit, could push gold prices lower near-term,” said commodity analysts at Merrill Lynch. At the same time, another senior commodity economist, Ross Strachan from Capital Economics, went on to add that “We were expecting to see a significant move in gold throughout the year as markets price in lower interest rates, but this rally has moved a little too far too fast.”
President Trump told reporters following the G20 summit in Osaka, Japan that “We’re right back on track” and that both countries would be holding back from additional tariffs. If anything, this will probably be the biggest economic development following the meeting of world leaders. Trump also alluded to partially lifting the restrictions placed on the Chinese telecom giant Huawei.
At the same time, North Korea agreed to proceed with denuclearization talks in the Korean peninsula, according to the North Korean state media KCNA.
With gold prices being inversely correlated with international, geopolitical tensions, this surprise development from North Korea will help push prices down further, even though worries surrounding the Korean peninsula have died down in comparison to earlier in the Trump administration.
While many have gone on to predict that gold will surge to new heights, breaking perhaps the $1,500 price mark, others argue that this isn’t sustainable nor reasonable. Time will tell what will happen to the yellow metal.