On Friday, the dollar index was little changed at around 99.45, while spot gold rebounded slightly to around $1,728 an ounce. Gold fell more than $20 on Thursday. On the other side of the news, the dollar fell about 20 points against the yen after the bank of Japan left interest rates unchanged. In terms of the global epidemic, the total number of confirmed covid-19 cases worldwide has exceeded 5.19 million, and the total number of confirmed cases in the United States has exceeded 1.62 million.
Double top finish gold fears a bigger sell-off
Gold prices plunged more than 1 per cent on Thursday and analysts said the recent drop was driven by profit-taking. Gold surged to $1,764.55 an ounce earlier this week, its highest level since October 2012.
Spot gold fell more than $20 on Thursday, hitting an intraday low of $1,717 an ounce before closing at $1,725.24.
In addition to investors taking profits, a stronger dollar weighed on gold on Thursday.
Kitco analyst Jim Wyckoff said profit-taking by some short-term futures traders was the focus on Thursday. The rebound in the dollar index is also a negative factor for metals markets.
On Wednesday, the us senate passed a bill that could bar Chinese companies such as alibaba and baidu from listing in the us after President Donald trump said it was “China’s incompetence” that had caused a “pandemic on a global scale”. Trade tensions between China and the United States have prompted some to unwind gold holdings for safer cash.
Major Wall Street indexes fell as rising tensions between China and the United States and fears of a recovery from the coronavirus-induced recession weighed on sentiment. This year, gold has at times moved in tandem with equities, especially as sharp selling has prompted investors to sell gold for cash or to call margin calls.
Phil Streible, chief market strategist at Blue Line Futures in Greenwich, Connecticut, said: “stocks are obviously overbought and there’s a lot of money pouring into the tech sector, so once you start to unwind, you have a trading panic… Gold will come under some pressure as people try to raise capital.”
Gold fell further on Thursday, falling below $1,725.90 an ounce, according to an article on Economies.com. As shown in the chart, this suggests that the double top has been constructed and gold prices are expected to fall further in the next few sessions.
The price of gold closed below $1,725.90 an ounce on Thursday, which would push it first down to $1,691.10, Economies.com added.
Still, some gold bulls say massive fiscal and monetary stimulus by governments around the world will support gold buying in the long run.
To limit the spread of novel coronavirus, massive economic stimulus measures were taken around the world to limit the economic losses caused by lockdowns and suspensions. These measures supported gold, which is widely seen as a hedge against inflation and currency depreciation.
“The fundamentals of gold have never been better,” says Jeffrey Sica, founder of Circle Squared Alternative Investments. Unless we’re more optimistic about vaccines, we’re going to start to see a spike to new highs. People are still worried about outbreaks around the world. Any news that companies are struggling to reintegrate into the economy will ultimately push gold higher.”
“The magnitude of the monetary stimulus in the financial system, the need to stimulate demand for a period of time and the risk of inflation are all positive for gold in the long run,” said Craig Erlam, analyst at OANDA.
Earlier, fed policy makers acknowledged that further support could be on the CARDS if the recession continues.
Tensions between China and the United States weighed on stocks and boosted the dollar
In intraday trading on Thursday, the dollar index rose nearly 50 points from a session low of 99.04 to a new session high of 99.53. The dollar has been a relatively safe haven against a backdrop of trade tensions between the United States and China.
In addition, the euro’s four-way rally against the dollar came to an abrupt end as optimism about closer fiscal union in Europe faded, which also helped the dollar index.
Rising tensions between China and the U.S. weighed on sentiment, with U.S. stocks falling Thursday. The dow Jones industrial average ended down 101.78 points, or 0.4%, at 24474.12. The s&p 500 fell 0.8% to 2948.51. The nasdaq composite index fell nearly 1% to 9284.88.
The U.S. senate on Wednesday passed the foreign company accountability act, which could bar many Chinese companies from listing on U.S. exchanges or raising money from U.S. investors without complying with Washington’s regulatory and audit standards.
The bill, proposed by senator John Kennedy, republican of Louisiana, would require companies to prove that “they are not owned or controlled by a foreign government”. Chinese companies listed in the us, led by alibaba, fell on the news.
While the law could apply to any foreign company seeking access to us capital, lawmakers said moves to tighten disclosure requirements were aimed primarily at Chinese companies. The White House declined to comment.
On Wednesday, U.S. secretary of state mike pompeo again took aim at China, calling its $2 billion commitment “trivial.”
On trade between China and the United States, White House national economic council director larry kudlow said on Thursday that while China’s purchases of American goods were behind schedule because of the epidemic lockdown, the first phase of the trade agreement between China and the United States was “unaffected” and would not be renegotiated.
In an interview with the Washington post live online, kudlow said U.S. trade representative Robert lighthizer and U.S. Treasury secretary Steven mnuchin “have informed the President that the agreement is not affected and that China has every intention of implementing it.”
The United States said on Thursday it was seeing positive signs of Chinese action on agricultural products as part of the first phase of the trade deal, saying certain U.S. agricultural products could now be exported to China.
The U.S. department of agriculture and the office of the U.S. trade representative said in a statement that new progress has been made in implementing the agriculture provisions of the first phase of the u.s.-china trade agreement.
The bank of Japan made its decision
The bank of Japan announced its latest interest rate decision. The bank of Japan left its benchmark interest rate unchanged at minus 0.1 per cent and its 10-year Treasury yield target near zero per cent.
The bank of Japan said it would provide support by introducing new provisions for the fund, which would be about y7.5bn in special measures.
It is important to note that this is a monetary policy meeting on schedule, and a sudden meeting this unscheduled rate resolution because recently released data show that Japan’s GDP contracted sharply in the first quarter, a sharp drop in exports in April, Japan may factory activity accelerated decline, to the bank of Japan to seek quickly to provide financing for troubled firms, reveal its flexibility in supporting economic position.
The yen was boosted by the bank of Japan’s lack of fresh easing. After the bank of Japan decision, the dollar fell about 20 points against the yen, touching a low of 107.55.
Globally, the number of novel coronavirus infections exceeded 5.19 million. The us has confirmed more than 1.62 million cases
According to the latest statistics, the total number of confirmed COVID-19 cases worldwide has exceeded 5.19 million. There are now more than 200,000 confirmed cases in six countries, including Russia, Brazil, Spain, the UK and Italy. In addition, France, Germany, Turkey, Iran, India and Peru have all reported more than 100,000 confirmed cases. The total number of confirmed cases in the United States exceeded 1.62 million. Russia and Brazil each have more than 300,000 confirmed cases of COVID-19.