Investing.com – President Donald Trump’s tease of the possibility of a faster-than-expected U.S.-China trade deal rained on the gold bulls' parade ahead of the Fed rate decision.
Both futures and spot prices of gold fell below the key bullish level of $1,500 per ounce on Monday after the president said he expected to sign a significant part of a planned trade deal with China ahead of schedule, without elaborating on the timing.
U.S. gold futures for December delivery settled down $9.50, or 0.6%, at $1,495.80. In post-settlement trade, it was down $12.65, or 0.8%, at $1,492.65 by 2:47 PM ET (18:47 GMT).
Spot gold, which tracks live trades in bullion, was down $14.10, or 0.9%, at $1,490.41.
“With comments from China suggesting firm progress on the trade deal and overall optimistic risk-on mentality in the markets, it makes sense to see safe haven liquidation,” said Eric Scoles, commodity markets strategist for RJO Futures in Chicago.
“As long as economic mentality remains this positive, it would take some significant event to see gold turn into a bull market anytime soon. I wouldn’t consider the trend to be truly bearish just yet either.”
Monday’s slide in gold belied weaker data out of Beijing that reinforced signs that the Chinese economy was slowing.
Profits at Chinese industrial companies fell for the second-straight month in September as producer prices continued their slide, data showed, highlighting the impact of a slowing economy and protracted U.S. trade war on corporate balance sheets.
Gold futures and bullion had steadily advanced over the past week to recapture the $1,500 handle that had been out of reach in the two prior weeks. The catalyst for the rebound had been Wednesday’s upcoming Fed rate decision, where the U.S. central bank is expected to approve a third-straight quarter-point rate cut for the year.
While another round of U.S. easing is expected, gold could take an even bigger hit if the Fed decides to leave rates unchanged this week.
How bad that hit will be is still anyone’s guess. COMEX futures fell to $1,465 on Sept. 29, while spot gold tumbled to $1,459.15 on Oct. 1. The yellow metal could test those lows and more, unless, of course, Brexit complications spike again or the much-touted "phase one" of the U.S.-China trade deal doesn’t get done.