With mixed signals from the US bond market, gold continued to consolidate around $1,870. Gold retreated from a two-week high as the European Central Bank was less dovish than expected and U.S. data did little to dent economic sentiment in the early days of new President Joe Biden’s administration, with unemployment and housing data easing. On the U.S. -China dispute front, Biden’s team continued to take a tough stance on China, condemning China’s sanctions and raising the prospect of a continued trade war between the two countries, which continued to support the gold rally.
Fundamentals: Biden Remains Tough on China
As new U.S. President Joe Biden took the oath of office, China announced sanctions against 28 U.S. individuals for serious violations of China’s sovereignty in China-related issues. Biden took over after the White House, the national security council spokesman Emily horn (Emily Horne) said in a statement to Reuters, China sanctions now is trying to create internal divisions in the United States, urging bipartisan censuring, said China’s former President of the United States government officials trump sanctions is useless and cynical.
Horn responded: “The imposition of these sanctions on the occasion of the inauguration appears to be an attempt to resolve partisan differences, and both parties in the United States should issue statements condemning this useless and cynical action, and President Biden looks forward to working with leadership of both parties to put the United States in a position to compete with China.”
The former President of the United States trump’s national security adviser, John Bolton (John Bolton) were included in the sanctions list, he released after the news on twitter post said, because he “bad behavior” by the Chinese government sanctions, poking fun at willing to accept the glorious certification, said is he free efforts to defend the United States.
In the face of China’s rising power, Mr. Biden’s nominee for director of national intelligence, Avril Haines, has also said she supports an aggressive approach to Beijing. “Our attitude towards China must evolve and fundamentally meet the reality of what we see as an aggressive China today,” she said. But so far, few experts believe Mr. Biden will be as hostile to China as Mr. Trump. Mr. Biden’s nominee for secretary of state, Antony Blinken, told the hearing that ‘there is no question that China poses a challenge to the U.S.’ and that he believes there is a solid foundation for building a bipartisan U.S. policy to counter China.
Kurt Tang, a former U.S. diplomat, believes the next few years will see a stalemate between China and the U.S., with China continuing to do things the U.S. doesn’t like. “The US urgently needs to prioritise its domestic challenges, which could give China breathing space to advance its agenda, be it technological progress or issues from Taiwan to the border with India,” he said. I think it’s going to be a difficult process to fix, one that will lead to more disagreement than agreement, and one that will not lead to breakthroughs in many areas, “he said.
Fundamental Analysis: ECB monetary policy unwarming Bank of Japan left interest rates unchanged
Gold prices took a hit after the European Central Bank’s statement on monetary policy was less dovish than expected. In a concession to some hawks in the ECB, the doves added to the view that banks may not need to fully tap their €1.85 trillion emergency bond-buying programme (PEPP). The amount of inflation quantitative easing is negative, and although some analysts see it as little more than a subtle tweak in the ECB’s quantitative easing metrics, monetary easing will remain their key tool. In addition to the ECB, the Bank of Japan also held its monetary policy meeting and, as widely expected, kept short-term interest rates unchanged.
U.S. unemployment and housing data both improved, and analysts said the data underscored that the United States is now heading for a “K-shaped” economic recovery, in which low-wage service sector employees and the broader service sector will be destroyed in a new pandemic, while manufacturing continues to be supported. Loose monetary policy has boosted the real estate market and widened the gap between rich and poor in the economy. In the US policy that investors are now focusing on, this dynamic should underline the need for more fiscal and monetary stimulus.
In a new note, Georgette Boele, senior precious metals strategist at ABN Amro, revised her outlook for gold and said prices had peaked. She notes that the bullish environment for gold has deteriorated sharply in the past month and believes the market will struggle this year as rising inflation forces the Federal Reserve to tighten monetary policy faster than investors expect.
“Very soon later this year, core inflation will pick up, prompting some FOMC members to believe that they are on track to exceed 2 percent in a one-off move,” she said. In this scenario, the first rate rise is likely to come in 2023, much earlier than previously thought. At the same time, the real yield on the 10-year US Treasury has fallen below its 2021 low and is set to rise as we no longer expect nominal yields to fall.”
According to the daily gold price chart, the main trend is down and trade of $1966.80 will change the main trend. A break above $1821.30 would indicate a resumption of the downtrend, with the next price target at $1771.30.