China-us trade is at the heart of the market! Gold rises and falls in extreme moods! Early trading down nearly $10! What’s next?

On Monday (May 25) morning, the international spot gold market volatility retreat, now suddenly accelerated the decline, the intraday low hit $1,725.86 / ounce, since the day’s high down nearly $9, is still down, currently trading at $1,727 / ounce area.

The dollar and gold rallied on Friday as renewed trade tensions between China and the United States heightened concerns about a slow global economic recovery already battered by the coronavirus pandemic. Nerves are fraying again, putting pressure on equities, supporting the dollar, which is seen as a safe haven, while boosting precious metals.

The international spot gold sub-market rose as high as $1,739.51 an ounce in the morning to $1,726.35, and fell as low as $1,722.80 to close at $1,733.90, up $7.70 or 0.45%.

Meanwhile, COMEX June gold futures ended the day up 0.8 percent at $1,735.50 an ounce, down 1.2 percent on the week.

Tai Wong, head of basic and precious metals derivatives trading at bmo, said: “China’s tough stance on Hong Kong could exacerbate tensions [with the us], with a potential confrontation between us warships and Iranian cargo ships bound for venezuela also a major concern in the current market, prompting investors to buy.”

Trade tensions have raised concerns about a slowing global economic recovery, putting pressure on stocks but supporting the dollar, which is also seen as a safe haven. For the first time, the Chinese government did not mention a specific target for annual economic growth, underscoring the economy’s woes as the market sought safety in gold. Earlier in the week, gold, seen as a safe haven amid political uncertainty, hit a more than 7 1/2-year high of $1,765.10 an ounce.

Net short dollar positions held by speculators fell in the latest week, according to Reuters calculations and data released by the commodity futures trading commission on Friday.

Data showed a net short position in the dollar of $7.66 billion in the week ended May 19, the lowest since speculators took a net short position in the U.S. currency in early march. Net short positions in the previous week were $9.08 billion.

Meanwhile, Fitch Solutions said in a report that gold has held on to key support at $1,700, providing momentum to hit 2011 highs in the coming quarters. With qe in full swing, macro and geopolitical uncertainty and strong investor flows, longer-term low interest rates should continue to support gold prices over the next six to 12 months, it added.

On the physical side, gold demand has also rebounded as Asia’s big central economies ease their blockade.

Tensions between China and the U.S. are rising again, but the vaccine hopes to limit gold’s gains

The issue of Hong Kong has again become a focus of attention in the gold market. US President Donald trump said earlier that the us would have a strong response if China passed legislation in Hong Kong, as China’s National People’s Congress is considering a bill to safeguard Hong Kong’s national security.

At a regular press briefing last week, Chinese foreign ministry spokesman zhao lijian said the issue of maintaining Hong Kong’s national security legislation was purely China’s internal affairs and that no foreign country had the right to interfere. The Chinese government is firm in its determination to safeguard China’s sovereignty, security and development interests, to implement the principle of “one country, two systems” and to oppose any outside interference in Hong Kong affairs.

On Wednesday, the U.S. senate passed a foreign companies accountability act is further exacerbated the tensions between China and the United States, this bill is not directly call Chinese companies, but many Chinese companies may be prohibited in Washington don’t follow the regulation and auditing standards, can’t exchange in the United States or to raise money from U.S. investors. This may increase the risk of delisting.

On the other hand, at a time when covid-19 is not really under control, the vaccine news is mixed, but some optimism limits gold’s upside.

Moderna is developing a novel coronavirus vaccine that will help protect against novel coronavirus by generating an immune response in volunteers during early clinical trials, according to reports from CNBC and other media.

The company said in a statement Monday that the primary purpose of the study was to observe the safety of the vaccine, and that it had not yet shown significant safety issues in phase 1 clinical trials, and that Moderna planned to continue to push it into broader testing. The vaccine, called mrna-1273, USES messenger RNA technology and is the most advanced vaccine in the United States.

One of the biggest recent concerns about the economic recovery is the risk of a second outbreak. If an effective vaccine or treatment is available, it will certainly help to restart the pace of the economy and make it more stable, which will help financial markets return strongly.

Since then, however, there has been some bad news about vaccines, but the recent spate of vaccine news is raising expectations. To some extent, this has limited the gold bulls, gold prices upside space is restrained.

Golden aftermarket outlook

“Not only are gold supported by low interest rates and economic stimulus, but tensions between the United States and China are also rising, which will keep gold on track for all-time highs,” said Phil Flynn, senior market analyst at Price Futures Group in New York.

Sean Lusk, co-head of commercial hedging at Walsh Trading, expects market participants to continue to buy gold on dips. Gold prices were supported by renewed tensions between the United States and China.

Richard Baker, editor of the Eureka miners report, also expected gold prices to rise. “trump’s decision to attack China for its lack of transparency on novel coronavirus as part of his re-election campaign could reignite trade tensions between the world’s two largest economies,” Baker said. At the same time, tensions are rising again in Hong Kong and overall global uncertainty is rising. All this is a boost for gold.”

Bob Haberkorn, senior commodities broker at RJO Futures, also expects gold to strengthen. It points out that in will be coronavirus outbreak caused by blocked, the economy is gradually restored, the optimism for the future economic growth. Still, governments and central Banks around the world have flooded the economy with money that observers have for some time described as bullish for gold.

And there is no shortage of caution about gold’s rise.

Adrian Day, chairman and chief executive of Adrian Day Asset Management in Toronto, said gold could fall back in the coming week before eventually rising again. As the us economy starts to restart, there will be initial optimism in equity markets, which could trigger a long overdue pullback in gold prices. So expect gold prices to fall in the coming week. But because of the so-called ‘policies’ pursued by the world’s major central Banks, we remain fundamentally very bullish on gold in the long run.

Adam Button, managing director of ForexLive, also took a neutral stance. “This is a testing time for the gold market. From a fundamental point of view, everything is ready for a major breakthrough, but the market is worried that sovereigns and central Banks will sell or there will be a lack of buying. Ultimately, gold is going to be a lot higher, but in the short term it’s trading above $1,750, so I’m neutral.”

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