In Asian trading on Monday, spot gold gave up early gains and was hovering around $1940, while silver was trading above $26, a level it had previously lost ground to.
Whether it is a postponement of a US-China trade meeting, a surge of novel Coronavirus (CoVID-19) cases, or a call to revive congress, they have successfully dampened the risk-tone mood in the market. However, the mixed risk sentiment has unnerved gold traders.
U.S. and China: A meeting scheduled for Saturday to review the first phase of a TRADE agreement between China and the United States will be delayed due to scheduling issues and no new date has been agreed, Reuters said, citing sources familiar with the plans.
“This is good news because it may have taken a back seat for a while,” said Rodrigo Catril, senior currency strategist at National Australia Bank.
“But there are other uncertainties that need to be addressed,” he said, referring to political factors such as the looming U.S. presidential election and challenges to the view that a new epidemic hotspot in Europe could push the euro higher.
Coming up, the Democratic National Convention kicks off on Monday, the starting gun for the final sprint to the November election. Biden, who is expected to be the presumptive nominee, will climax the event with a speech later Thursday.
While the U.S. presidential election campaign has been a long one and a focus for investors, the market is likely to be unimpressed as issues such as the COVID-19 outbreak and U.S. fiscal measures have dominated the earlier session. The coming weeks, however, are likely to be more about the election.
Lamar Villere, manager of Villere & Co., said the effect of elections will grow as November approaches and republican and Democratic candidates are recommended. He disclosed that his firm expects market conditions to be volatile in the coming weeks, so it is prepared to sell shares, keep up to 20 percent of its cash, wait to see what happens and rebalance its portfolio.
Data from TD Securities dating back to 1930 show that three months before an election, if the S&P 500 index rose, the incumbent President tended to win. Meanwhile, no sitting President has won re-election during the recession, td Securities said.
Joseph Amato, chief investment officer of Neuberger Berman Equity, wrote in a recent research note that investors should also be prepared for the possibility that Trump might have doubts about the authenticity of the vote or might drop out of the race altogether.
Mr Trump raised concerns about the election when he tweeted in late July that the election could be postponed until people could “vote properly, safely and safely”.
“The further he falls behind in the polls, the more incendiary his decisions are likely to become,” Amato wrote.
As for the outlook for gold, “the gold market has been a parabola, so when you see the stimulus talks get bogged down and Treasury yields rise a little bit, you get a little bit of a pullback,” said David Meger, director of metals trading at High Ridge Futures in New York.
“Gold has probably gone a little too far, too fast and we think the market needs a breather and a consolidation and that’s what we’re seeing.”
On the daily chart, the U.S. dollar index.DXY continued to come under pressure after three straight days of losses, losing the key 93 mark for the day. The daily MACD red kinetic energy column held steady, with the KDJ random index oscillating around the 50 level, indicating the dollar could consolidate in the near future.
On the 4-hour chart, the DOLLAR index appears to be heading for a falling high, with an eye on whether the previous low of 92.92 will be broken. The MACD green momentum column was largely stable, with the KDJ stochastic approaching the oversold level, indicating renewed bearish momentum for the dollar and short-term or pressure.
On daily charts, gold continues to hover near its 20-day average and is currently trading around the 1940s. The daily MACD green momentum column is expanding, with the KDJ random index trading around 50, indicating gold bearish momentum remains, but the decline may slow.
The 4-hour chart shows gold rebounding after hitting a low of $1,862, with the rally stalled near its 100-date average of 1966 and the focus is on breaking above that level. The MACD red momentum column held steady and the KDJ random indicator dipped below the 50 level, indicating solid bullish pressure on gold, short term or consolidation.
On daily charts, silver continued to come under pressure during the day after its heavy losses on Friday, at one point falling below the $26 mark and still trading above its 20-day average. A small expansion in the green momentum column on the daily MACD chart, with the KDJ stochastic approaching the 50 level, indicates that bearish momentum for silver has strengthened or is heading lower.
In the 4-hour chart, silver continued to rebound from an earlier low of $23.39, staying above its 100-term average. The MACD red momentum column is close to disappearing, with the KDJ stochastic below the 50 level, indicating lower bullish momentum for silver, short term or further downside.
Fundamentals positive factors:
- US President Donald Trump said On Friday that he is considering banning more Chinese companies in the US, such as Alibaba, after targeting TikTok, the international version of TikTok.
- A meeting scheduled for Saturday to review the first phase of the TRADE agreement between China and the United States will be postponed due to scheduling issues and no new date has been agreed, sources familiar with the plans said, according to Reuters.
- During his visit to Slovenia on Wednesday, Pompeo reiterated his call not to use equipment from Chinese company Huawei to build 5G networks.
- The State Department on Thursday formally announced that Confucius Institutes across the United States must be registered as foreign missions. The decision is seen as adding to recent tensions between The us and China.
Fundamentals negative factors:
1.U.S. retail sales rose less than expected in July as consumers cut back on purchases of motor vehicles. Retail sales are likely to slow further in coming months as the number of new cases spirals and unemployment benefits fall.
- With the House and Senate in recess on Friday and no time scheduled for new talks with NEGOTIATORS for U.S. President Donald Trump, hopes for a new round of stimulus measures are fading.
- U.S. President Donald Trump announced on August 13 that Israel and the United Arab Emirates have reached an agreement on the full establishment of diplomatic relations. The situation in the Middle East is expected to ease.
- White House economic adviser Larry Kudlow said On Thursday that the Trump administration was pleased with China’s progress on its promise to buy American goods in the first phase of the trade agreement, suggesting that the deal would pass a preliminary review on Saturday.