Over the past week, traders have been reminded of the fickle nature of US-China trade relations, and the gold price has reacted accordingly by rising in tandem with trade tensions. After hitting $4k for the first time last week, the gold price took a quick breather. However, the stay of the precious metal below the $4k level was short-lived. That’s because - the dicey nature of trade relations between the world’s two biggest economies has given investors renewed reasons to add gold to the portfolio as an uncertainty hedge.
With US interest rates projected to move lower and a government shutdown still in effect, there were already multiple fundamental pillars of support for gold and now the latest US-China trade spat is the cherry on top. Spot gold was seen trading at the $4160 level (as of Asian morning trading hours on Wednesday), ahead of support at $4064 and $3971. On the topside, there isn’t that much technical resistance to speak of until around the $4200 level ($4202 more specifically).
While the technicals are looking overstretched and arguably overbought (reflected by elevated RSI’s), this is being offset by a favourable fundamental backdrop of lower yields, US shutdown uncertainty and trade tensions. The bullish outlook remains in place, but any simmering down of US-China trade tensions could cause a short-term price pullback.
In FX, the USD has been constrained by falling treasury yields (with the US 10-year note now hovering close to 4%) with bond-buying back in favour due to economic risks from the US government shutdown and heightened trade tensions. The Dollar Index (DXY) now sits close to the 99 level, and any further deterioration in treasury yields could see support at 98.60 tested. This dip in form from the USD has allowed the yen to claw back some of the ground it lost last week following the LDP elections (with the USDJPY rate falling 0.8% over the past 5 days).
Trade tensions and expectations of excess crude supply in 2026 (as predicted by the International Energy Agency) have kept the US oil price pinned below the $60 level. US oil trades at $58.30 ahead of support at $57.30 with the Gaza peace deal also keeping prices pressured. Increased OPEC+ supply lends itself to a downside bias in the oil market, however if the markets starts to feel more positive about US-China trade relations oil could make a move higher towards resistance at $60.60.
Overall – Trump’s comments about China and trade over the past week have put traders on-notice that a US-China trade deal of some shape remains anything but a ‘fait accompli.’ Trump and Xi could still meet in South Korea later this month (at the APEC summit) and things could still be smoothed over between the economic powerhouses. But with threats of further triple digit tariffs on China come November 1st and now agricultural products back in the trade firing line, traders are somewhat left in limbo as to the trajectory of US-China trade talks. Trump’s tone on China tends to flip from sweet one day to sour the next, which naturally doesn’t lend itself to markets operating with any great conviction. This story, and the US government shutdown are the themes which could determine the direction of risk assets for the remainer of the month.
