Spot gold traded in a narrow range around $1,878 an ounce in early Asian trading on Wednesday, hitting an intraday high of $1,880.82 an ounce. In the previous session, spot gold lost its fifth consecutive session, falling as low as $1,874.48 and more than $40 from its session high, before closing down 1.82 percent at $1,877.88 an ounce on disillusioned hopes that Congress would agree on a new stimulus bill.
On Tuesday afternoon, Local time, Mr. Trump said he had rejected the Democrats’ stimulus package and ordered his representatives to stop negotiating until after the election. “We offered a very generous $1.6 trillion package, and she [Speaker of the House Nancy Pelosi], as always, has no intention of negotiating in good faith,” Mr Trump tweeted. Trump said he had directed Senate Majority Leader Mitch McConnell to “focus on confirming my outstanding Supreme Court nominee, Amy Coney Barrett.”
After the news came out, the three major U.S. stock indexes dived, spot gold fell $15 in the short term, down nearly $30 from the daily high, spot silver fell more than 3%. The yield on the 10-year Treasury note fell more than 5 basis points to 0.727%. U.S. and Oil prices are lower in the short term.
In response, Ms Pelosi said Mr Trump was “putting himself first at the expense of the country” by cancelling the talks. “Pulling out of the coVID-19 stimulus talks shows that President Trump is not willing to dismantle the virus as required by the HEROES Act. He disdains science, and our heroes in health care, first responders, sanitation, transportation, food workers, teachers, teachers, and others. He refused to put money in the workmen’s pockets unless his name was printed on the cheque.”
Cleveland Fed President Loretta Mester believes the recovery will be slow without a new bailout package from Congress. She was disappointed that Congress had failed to push through a new rescue plan. In an interview with CNBC, Meester said that while the US economy has improved, the impact of the COVID-19 outbreak has caused huge economic losses, and many Americans and businesses want financial assistance from the government, without which the economic recovery would be very slow. Meester believes that the Fed’s quantitative easing measures can still be quite helpful, but that fiscal policy makers should act accordingly.
“It’s very unfortunate,” said Steve Lamar, President of the American Apparel & Footwear Association, referring to Mr Trump’s decision to halt stimulus talks. The economy is not something you can put aside and pick up at a convenient time. The people are suffering now.”
Speaking at an online event organised by the National Association for Business Economics, Colin Powell, fed chairman, said: “Too little rescue will lead to a weak recovery and cause unnecessary hardship for households and businesses. For now, too much policy support poses less of a risk to the economy than too little. Even if the policy action turns out to be greater than needed, it will not be in vain.”
With novel Coronavirus still raging and vaccines still waiting, the U.S. economic recovery risks stalling in the fourth quarter, with activity well below pre-pandemic levels. Jay Bryson, chief economist at Wells Fargo, said: “The news suggests that us growth in the fourth quarter is likely to slow to the single digits from about 30 per cent in the third quarter, making the economy more vulnerable to another shock.”
“It increases the likelihood that the U.S. will fall into the dire situation that Powell outlined today,” said Diane Swonk, chief economist at Grant Thornton. “We will face a more prolonged recession that will leave deeper scars on our economy, especially on the labor front.”
On the geopolitical front, Western diplomats at the United Nations on Tuesday criticized China’s human rights abuses against The Muslim Uighur minority and its crackdown on Hong Kong’s autonomy.
Germany’s ambassador to the UN Hess root that day in the United Nations general assembly general debate of the third committee on behalf of Australia, Canada, France, Japan, New Zealand, Britain, the United States and Germany and other 39 countries issued a joint statement, and refers to the human rights situation of xinjiang and events in Hong Kong in recent development of serious concern: “we urge China to respect human rights, especially the religion and the rights of minority nationalities, especially in xinjiang and Tibet.”
“We are gravely concerned about the existence of a large network of ‘political re-education’ camps in Xinjiang, where reliable reports indicate that more than a million people have been arbitrarily detained,” the statement added. We are seeing more and more reports of serious human rights violations. Freedom of religion or belief, freedom of movement, association and expression, and Uighur culture are severely restricted. Extensive surveillance continues to disproportionately target Uighurs and other ethnic minorities, and there are increasing reports of forced labor and forced birth control, including sterilization.”
Beijing retaliated by focusing its anger on the US. Zhang Jun, China’s permanent representative to the United Nations, called China’s human rights achievements “widely recognized” and urged Washington to “take a good look in the mirror” and eliminate racial discrimination in its own society before attacking other countries.
A speech by European Central Bank President Christine Lagarde at 08:10 p.m. Beijing time is expected to get more attention than usual. Inflation data on Friday showed a surprise fall in the eurozone in September. ECB officials repeatedly warned in September that the euro’s strong rally this year could pose risks to the central bank’s inflation outlook. Ms. Lagarde had already said last week that she and the ECB’s rate-setters would take into account the direction of the euro when assessing the inflation outlook and determining the appropriate level of additional stimulus needed for the eurozone economy, an implicit threat to try to weaken the currency.
Investors will be watching for further details on the ECB’s signals and any actions it might take to limit the euro’s strength. They are also likely to scrutinise the minutes of the European Central Bank’s September monetary policy meeting, released on October 8. At that meeting, Ms Lagarde first broached the subject of the euro’s strength.
Bart Melek, global head of strategy at TD Securities, told Kitco News on Tuesday that the fall in gold prices is not surprising in this context, as gold has been moving in line with equities recently. “Gold has been trading like a risk asset for some time, and it’s still trading like a risk asset today,” Melek says. “The dollar has also heard Trump and we have seen a big rally in the dollar, which has a big offsetting effect on gold.” Melek noted that the market’s reaction is telling investors that there will be disinflationary pressures ahead. “If we don’t see more government spending, that means people will start to run out of money,” he said. This could become a long-term problem – they will spend less, and GDP in the fourth quarter will be terrible. This is the opposite of What Powell suggests. We need more, and we’re getting less.”
“The main risk is the upcoming US election. If the result is close and Biden is ahead and Trump does not acknowledge it, then we are heading into a long period of uncertainty, “said Carsten Fritsch, analyst at Commerzbank. “This is mild news for the dollar and bullish news for gold.”
“Gold weakened as the dollar benefited from Fed Chairman Colin Powell’s comments that fiscal support was too weak for a weak recovery,” said Suki Cooper, an economist at Standard Chartered bank in New York. “Tactical positions are still relatively light ahead of the U.S. election, but prices are likely to hover around $1,900 / oz in the coming days as support and resistance levels remain wide.”
Gold fell sharply after strong headwinds at $1,918.00 blocked recent attempts to rally, According to Economies.com. Gold attacked and fell below $1901.80, signaling a resumption of the recently recommended bearish trend. In the downward direction, the initial target is at the level of $1877.00. If it falls below, it will fall further to the level of $1860.90. Maintaining below the level of $1918.00 is a key condition for achieving these targets.