Gold fails to crumble as trade deal hit meets dollar’s decline

Gold held its own on Friday as investors weighed bullion’s merits heading into 2020 after the US and China managed a breakthrough in their bitter and drawn out trade dispute, with the commodity’s initial losses driven by weaker haven demand offset by a slump in the dollar.

Bullion fluctuated after President Donald Trump signed off on a phase-one deal with China, averting the introduction of more US tariffs, according to people familiar with the matter. Traders were also watching the UK general election, the governing Conservative Party was on course for a big majority. Sterling rose.

“The news out of the US that an agreement has been reached with China is positive for growth, and therefore negative for gold,” Michael McCarthy, chief market strategist at CMC Markets, said by phone. “But at the same time, we’ve seen a weakening of the US dollar. And so, they’re the two currents that are pushing and pulling gold at the moment.”

Gold’s heading for an annual advance, with its fortunes in 2019 shaped both by more accommodative monetary policy from central banks globally as well as the ebb and flow of the trade war. The removal of tariff uncertainty will return investors’ focus to signs the global economy is improving as a strong year for risk assets heads toward a close.

Following a 0.3% loss on Thursday, bullion for immediate delivery initially fell as much as 0.5%, but was just 0.1% lower at $1,467.80 an ounce at 5:46 a.m. in London. A Bloomberg gauge of the US currency was 0.4% lower, heading for the biggest weekly drop since October, as the pound rose.

In the U.K., Johnson’s win puts the country on track to leave the European Union next month. With counting complete in most districts, the Conservatives passed the threshold of 326 seats to give them a majority.

That development also contained conflicting elements for gold because while a clear majority for the Conservatives would be positive for the country’s economy, the potential for a no-deal Brexit has now increased, which could buoy the haven, according to McCarthy. “We’re locked in a bit of a vice,” he added.

Gold producers dropped. Newcrest Mining Ltd., Australia’s largest gold miner, declined as much as 2.3% in Sydney, as Evolution Mining Ltd. plunged as much as 8.1%.

In other precious metals, palladium extended its rally to an all-time high, having exceeded gold’s record set in 2011 earlier this week. Palladium jumped as much as 1.3% to $1,965.82 an ounce, and is up for a 16th straight day, the longest run of gains ever.