Global spot gold fell nearly $30 on Tuesday, hitting an intraday low of $1,906.24 an ounce and hitting a round low of $1,900, but safe-haven demand picked up again, sending gold prices up more than $20 after hitting a low, showing the volatility of recent investment sentiment. Geopolitical risk continued to generate safe-haven buying for gold, but the drop in stocks once again underscored the dollar’s idiosynasasic safe-haven value, which weighed on prices.
Geopolitical risks continue to dominate the market’s winds, with further signs of tension between China and India and between the US and China. Tensions between The two countries have flared up again since the first shooting at the border in 45 years on September 7, with no sign of easing tensions between the two countries, Indian media reported that Indian Air Force fighter jets flew hourly missions along the Line of Actual Control to maintain regular surveillance of neighboring countries.
Mr Trump, meanwhile, has been playing the China card in the campaign as the US election approaches. U.S. President Donald Trump held a News conference at the White House on Monday, labor Day, renewing his talk of economic decoupling and suggesting that the United States would not lose out if the two countries stopped doing business. The move comes as sources say the Trump administration is close to issuing a ban on some or all cotton products from China’s Xinjiang province because of alleged human rights violations in the region. Given that large global clothing brands use Xinjiang as a source of cotton and other textiles, the impact of a ban, if it takes effect, would be significant for the global garment industry, affecting both sentiment and fundamentals in financial markets.
On the other hand, the Brexit news still caused market concern. Trade talks between Britain and Europe broke down yesterday after media reports suggested the internal market bill could overturn parts of the Northern Ireland exit agreement signed with the EU. The British prime Minister also stressed the final date for a deal — October 15 — when he said Britain would leave the EU without a deal if no deal was reached by that date. Analysts expect market risks to continue to climb as that date approaches.
Julius Baer analyst Carsten Menke said the dollar’s rise was under pressure for gold, but prolonged market uncertainty was providing support below the yellow metal. He argues that a lot of recession fears are already priced into the gold price and that the market will be on the sidelines in the near term as investors wait for more to happen. Technical analyst Wang Tao said gold would fall to the support zone of $1880 to $1906 after breaking through the $1923 support.
On a technical level, the gold daily chart lost its uptrend line since Monday’s March 23 low of 1455, breaking the bullish structure of the past five-plus months. This trend line has provided important support for price upside over the past few months, so a break below it could have a significant negative effect. Separately, gold prices fell sharply after hitting a record high of 2075 on Aug. 7, and have since rallied less and less, suggesting bulls are losing momentum. Once it breaks below the 1903 (August 26 low) -1900 area, the downside target may move further to the August 12 low of 1863.
Gold was also hit by positive developments on vaccines. The Russian Health Ministry has announced that the country’s first satellite-V coVID-19 vaccine has been put into civilian circulation and is expected to be delivered to all regions of the country in the near future, according to the latest information. This could mean Russia will be the first country in the world to put a vaccine into civilian circulation, after registering the world’s first vaccine. As Russia speeds up the domestic circulation of vaccines, there are also two big pieces of good news for Chinese vaccines. Sinovac said On Monday that based on preliminary results of its early and mid-stage trials, its Novel Coronavirus candidate vaccine CoronaVac appears to be safe for the elderly, although the immune response induced by the vaccine is still slightly weaker than that induced by young people, according to reports.
Ubs said buying had remained low over the past two weeks. Speculators are showing selling sentiment, and if the downward trend that began this month continues for an extended period, it could trigger further selling of positions. Stick to the bearish view on expectations that last month’s 6-8 percent pullback could make gold’s weakness last longer.
AxiCorp analyst Stephen Innes said it is worth reiterating that there has been very little real money buying of gold in the past two weeks and that there is a sense that gold is falling out of favor. It is important to note that fast money investors are showing an interest in selling as gold prices rise, and I suspect positioning could become a further trigger if the downward trend that began this month continues. Indeed, at one point last month’s adjustment of 6-8% had a lasting effect.