Gold investing: conflict without a firefight! “No one-shot”, 20 Indian troops killed in Sino-Indian conflict! Beware the outbreak of concentrated geopolitical risk!

International spot gold traded at $1, 724 an ounce in the Asian session on Wednesday. Intra-day gold prices showed a narrow shock finishing trend, down 0.12%.

Optimism that the worst may be over for the U.S. economy was reinforced by upbeat U.S. retail sales data on Tuesday, as risk sentiment continued to rally as the three major U.S. stock indexes closed higher for a third straight day, the dollar index closed above the 97 level and spot gold edged higher.

Us retail sales surged 17.7 per cent in May, the highest monthly rate since the data began, with a forecast of 8 per cent and a revision to -14.7 per cent from -16.40 per cent. U.S. President Donald Trump later praised the strong data, adding, “It’s a big day for the stock market and jobs!”

Spot gold rose as high as $1,732.70 an ounce in early morning trading at $1,724.26 and dipped as low as $1,716.31 to close at $1,726.14, up $1.90, or 0.11 percent.

Meanwhile, COMEX gold futures for August delivery ended up 0.5 percent at $1,736.50 an ounce.

Bob Haberkorn at RJO Futures said gold fundamentals were strong given the low interest rate environment and uncertainty over the outbreak.

Tuesday’s rebound to $1,730 showed gold’s resilience in the face of uncertainty, Carlo Alberto De Casa, chief economist for ActivTrades, said in a note. Every time gold prices fall, investors seem to see it as a buying opportunity.

The conflict between China and India is fueling risk aversion

On Tuesday night Beijing time, the Indian military said 17 more Indian soldiers wounded in physical clashes in the Galawan Valley had died due to exposure to sub-zero altitude, raising the death toll from three to 20, global Times editor-in-chief Hu Xijin said on his latest weibo post on Wednesday. The incident caused a strong reaction in Indian public opinion.

The Indian military said on Tuesday that 20 of its soldiers had been killed in border clashes with Chinese troops, Reuters and the Associated Press reported earlier, citing a military statement. It was the first deadly border clash between the two countries in 53 years.

In addition to the 3 Indian soldiers who were killed earlier, 17 Indian soldiers later confirmed that they died of their injuries, according to a statement released by the Indian military on Monday.

China’s Foreign Ministry spokesman Zhao Lijian said India had crossed the border twice on Monday, provoking and attacking Chinese personnel, leading to serious physical clashes between the two sides’ border forces, AFP reported.

Both sides insist that no shots have been fired in the past 40 years. The Indian military said on Tuesday that “no shots were fired” in the latest clashes.

It’s not clear why a conflict that doesn’t involve a firefight could be so deadly. Some reports say they fought with stones and sticks.

Local media reported that the Indian soldiers had been “killed”.

Tensions have been rising in the Himalayan region, one of the world’s longest land borders, since last month, with China and India accusing each other of crossing the line of actual control separating their nuclear-armed neighbours. The territory has long been disputed, causing numerous skirmishes and diplomatic friction since the bloody 1962 war between the two countries.

There have been tense clashes along the border in recent weeks. India accuses China of sending thousands of troops into Ladakh’s Galwan Valley and says it occupies 38,000 square kilometres of territory. Several rounds of negotiations over the past 30 years have failed to resolve the border dispute.

The two countries have fought only one war, in 1962, when India suffered a humiliating defeat.

In May, dozens of Indian and Chinese soldiers clashed on the border in The northeastern Indian state of Sikkim. The two countries clashed in the region in 2017 as China tried to extend a border road across the disputed plateau.

There are several reasons for the current heightened tension, but competing strategic goals are at the root, with both sides blaming each other.

The next step is to keep an eye on the geopolitical situation. With tensions rising between China and India, North and South Korea, and the United States and China, investors need to watch out for renewed panic that could trigger a major sell-off.

Technical analysis:

The dollar

On the daily chart, the DOLLAR index settled in a narrow, volatile range from its lows and is now trying to rally. The daily chart MACD red momentum column is looming, KDJ random index higher, indicating the dollar rally momentum to restart, the next rally from low.

On the 4-hour chart, the DOLLAR index also presents a consolidation pattern, with the MACD red kinetic energy column unchanged and the KDJ random index biased higher, indicating that the DOLLAR may continue to consolidate in the short term.

gold

On the daily chart, gold traded in a narrow range under pressure, hovering near the 20-day average. The MACD green momentum column remained unchanged, while the KDJ random index came under a bit of pressure, indicating that gold still has downward momentum and a pullback is still possible.

On the 4-hour chart, gold prices were slightly under pressure, MACD green momentum column remained unchanged, KDJ random index turned lower, indicating that gold may continue to bear pressure lower in the short term.

Fundamentals positive factors:

  1. According to statistics from Worldometers, as of June 17, Beijing time, there have been over 8.25 million confirmed cases and over 440,000 deaths of COVID-19 worldwide. In the United States, there have been more than 2.2 million confirmed cases of COVID-19 and more than 119,000 deaths.
  2. The National Health Commission (NHFPC) confirmed 44 new cases Wednesday, including 11 imported cases (10 in Gansu and 1 in Sichuan) and 33 local cases (31 in Beijing, 1 in Hebei and 1 in Zhejiang). No new deaths; Three new suspected cases, all local (all in Beijing).
  3. The Indian military said on Tuesday that 20 of its soldiers had been killed in border clashes with Chinese troops, Reuters and the Associated Press quoted a military statement as saying. It was the first deadly border clash between the two countries in 53 years. In addition to the 3 Indian soldiers who were killed earlier, 17 Indian soldiers later confirmed that they died of their injuries, according to a statement released by the Indian military on Monday. According to hu Xijin, editor-in-chief of global Times, on his latest weibo post, late last night Beijing time, the Indian military said 17 more Indian soldiers had died in physical clashes in the Galawan Valley due to exposure to sub-zero altitude, raising the death toll from three to 20. The incident caused a strong reaction in Indian public opinion.
  4. South Korea’s Blue House said Tuesday that North Korea would respond harshly if tensions continue to rise following the bombing of the Inter-Korean liaison office in the border city of Kaesong. On Monday local time, South Korean President Moon Jae-in requested the dispatch of a special mission composed of Chung Eui-yong, head of the National Security Office, and Hsu Hoon, head of the National Intelligence Service, kCNA reported Wednesday. But the DPRK refused to accept the proposal. It also reported that the spokesman of the General Staff of the Korean People’s Army issued a statement on the same day, clarifying the DPRK’s upcoming military action plan.

Fundamentals negative factors:

  1. Preliminary clinical trials in the United Kingdom have shown that dexamethasone can save the lives of critically ill patients with COVID-19, reducing deaths by about a third in those on ventilators and by about a fifth in those on oxygen alone, the WORLD Health Organization (WHO) said Monday. The improvement of dexamethasone was observed only in severe patients and not in mild patients, the study noted.
  2. On Tuesday, retail sales in the United States rose 17.7 percent in May, a record high. Economists surveyed by Dow Jones expected a 7.7% increase. U.S. President Donald Trump praised the strong data, adding, “It’s a big day for the stock market and jobs!”
  3. The US government confirmed on Monday (June 15) that it would revise a ban on US companies doing business with Huawei to allow them to work together on standards for next-generation 5G networks. U.S. Commerce Secretary Wilbur Ross confirmed reports that his department is about to take action. The Commerce Department and other government agencies signed off on the rule change and are awaiting publication in the Federal Register as early as Tuesday, according to people familiar with the matter.
  4. Italy, Germany, the Netherlands and France have agreed to pay 750 million euros ($843.2 million) for 300 million doses of AstraZeneca’s COVID-19 vaccine, an Italian health ministry spokesman said. Japan’s ministry of Health, Labour and Welfare reportedly said these countries would have the opportunity to buy another 100m doses of vaccine. Italy will pay 185 million euros for 75 million doses of the vaccine developed by Oxford University.

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