The US and China deal will affect gold and oil
The US and China deal that could end a trade war is close. Donald Trump’s last meeting with Chinese Vice Premier Liu He brought positive news. In addition, negotiations are expected between the US President and Chinese President Xi Jinping, who may take the deal to the finish line. Experts are already suggesting a further value of assets, given the end of the trade war. According to analysts, above all, positive news will affect the cost of oil and gold.
How the US and China deal will change asset quotes
Over the past 2 weeks, oil shows serious fluctuations. The energy market was shaking amid alternate positive and negative news. However, taking into account the changed realities, experts predict a slow, but stable growth of black gold quotes. In particular, Brent crude oil should reach $ 70, and shale WTI – $ 60.
However, alertness in the market is still present. First of all, investors fear that after reaching an agreement to end the trade war, China may order large amounts of oil from the United States. Analysts suggest that such a move will help “appease” Washington. However, the euphoria is likely to be stronger. Therefore, growth will be gradual, but steady.
However, “black gold” is unlikely to hold high positions. Yes, euphoria does have a positive effect on quotes, but it tends to fade. If China starts cooperation with the United States in the oil sector, the United States can increase production even more. Already, the country is the world leader, extracting 12 million barrels per day, and if the PRC is interested, this figure could grow by another 1 million barrels.
The increase in oil production in the United States may offset the restrictions that apply to OPEC. Despite the fact that the United States produces light oil, and heavy oil is extracted in the Asian region, volumes may become the leading factor. In the future, this may bring down the hydrocarbon marketonce again.
In addition, against the backdrop of agreements between the United States and China, the fate of gold is interesting. Trade wars led the world to the next financial crisis, because of which investors were buying up the precious metal en masse. It is traditionally considered to be a “safe haven” in which you can “wait out” the global financial turmoil. The threat of a recession has diminished, what next?
Analysts predict that the key point for gold will be the report of Fed Chairman Jerome Powell. If the main financial body of the United States still refrains from another increase in key rates, the threat of a financial crisis finally recedes into the background. Thus, we can expect a reduction in the price of the precious metal.
However, the depreciation of gold will also not be sharp. The main reason for this is the uncovered demand for jewelry, which is present in the market. He will be able to mitigate the fall of the trend, but not to keep the value at record positions. Therefore, even the interest in bullion from the states that massively bought up the precious metal at the end of 2018 is unlikely to stop the gradual price reduction.
